Consumer Prices Grew More Than Expected in August
The cost of living in the U.S. grew more than expected in August, as the cost of food, energy, and housing climbed. According to a U.S. Department of Labor report released today, the consumer-price index increased 0.4% in August, twice what economists had projected, after rising 0.5% in July. The core gauge, which excludes volatile food and fuel prices, climbed a more modest 0.2% for a second month.
Rising commodity prices earlier this year forced many companies to pass on higher costs to consumers at a time when Americans’ wages were stagnating. Last week, Federal Reserve Chairman Ben Bernanke said that inflation is likely to moderate as some price increases prove transitory. “There has been more momentum in underlying inflation than many had expected,” said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York, though he doesn’t believe inflation will be a constraint on Fed policy. “The Fed will be focused on the real economy; they know inflation will be moderating.”
The Labor Department also reported today that U.S. unemployment benefits unexpectedly rose last week to their highest level since the end of June. Jobless claims climbed by 11,000 from the week earlier to 428,000 in the week ending September 10. Meanwhile, the Federal Reserve Bank of New York’s report on manufacturing in the region contracted more than expected in September, while its general economic index dropped to minus 8.8, its weakest reading since November 2010, from minus 7.7 in August. Readings below zero indicate that companies in the region, which includes New York, northern New Jersey, and southern Connecticut, are cutting back.
The August consumer-price report also showed that inflation-adjusted hourly wages fell 0.6% in August, the biggest one-month decline since July 2008, and were down 1.9% from August 2010. Economists’ forecasts ranged from a decline of 0.2% to a gain of 0.4%. The actual results included a 0.4% increase in the cost of rent, while shelter costs in general climbed 0.2%. Owners-equivalent rent rose 0.2% in August after rising 0.3% in July. Rental housing has been more in demand as mounting foreclosures scare people away from the housing market, while the poor jobs’ market and economic uncertainty have created demand for shorter-term commitments.
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Today’s report also showed that energy costs were up 1.2% in August from the month earlier. Gas prices climbed 1.9% and were up 32% from a year earlier. Food costs rose 0.5% as diary, meats, fruits, and vegetable prices climbed. The cost of medical care rose 0.2%. Costs of passenger cars were unchanged, but vehicle prices increased 0.9%. Apparel costs climbed 1.1%. Meanwhile, retail sales were flat, the economy generated no jobs, and hourly earnings fell.