The Consumer Price Index (CPI) continued to rise in August, though at a significantly reduced pace compared to previous months. Despite only increasing a slight 0.1%, inflation in August was still higher than most economists predicted. The Dow Jones estimates, for example, predicted that headline inflation would fall by 0.1%.
While monthly inflation grew in August, annual inflation keeps ticking down. In June, annual inflation reached a high point of 9.1%, the steepest annual inflation since the early 1980s. In July, annual inflation was 8.5% before dropping slightly to 8.3% in August.
According to the U.S. Bureau of Labor and Statistics (BLS), average hourly earnings grew by 0.3% between July and August. Because inflation grew 0.1%, the real average hourly earnings for all employees was 0.2% from July to August, seasonally adjusted.
The fact that real wage growth was positive in August is a good sign for American consumers and is a reversal from previous months. Real average hourly earnings fell 2.8% from August 2021 to August 2022, but a 0.6 percent decrease in average work hours means that the effective reduction in real average weekly earnings was 3.4%.
Economists had predicted a more positive CPI report with negative inflation in August. As a result, experts largely reacted to the news with pessimism, despite significant monthly decreases in energy and gas prices.
“We were hoping for something more positive, but [the August data] is not,” Sung Won Sohn, an economics professor at Loyola Marymount University and president of SS Economics, told Cnn. “I think inflation is certainly alive and well. If you look at the underlying trend — I look at labor costs and rent increases — they both are pointing in the wrong direction and going up at hefty paces,” Sohn said.
Learn more:
Sectors and Products That Grew More and Less Expensive in August
According to the U.S. Census, the services and sectors that experienced the highest pricing increases in August were food, shelter, and medical care. Shelter increased 0.7% monthly and 6.2% annually, while medical care increased 0.8% and 5.6% during the same period. Other commodities like new cars rose 0.8% in August, even as used vehicles decreased by -0.1%.
Overall food prices increased by 0.8% monthly and 11.4% annually, but certain food items increased more than others. Egg prices rose 2.9% monthly and a significant 39.8% between August 2021 and August 2022. The cost of bread rose 2.2% in August and16.2% annually, while canned fruit prices increased 3.4% monthly and 16.6% for the year.
Decreases in energy costs helped counteract these increases. In August, the overall energy index fell by 5%, while the price of gasoline decreased by more than 10%. Despite the latest monthly increases, energy is up 23.8% annually, while gas is up 25.6% for the year. Airline fares were another commodity with decreasing prices in August, falling 4.6% during the month despite growing 33.4% between August 2021 and August 2022.
