According to the Bureau of Labor Statistics, the consumer price index, or CPI increased 0.1 percent last month. The index is a chief inflation indicator and measures how much the prices of goods or services change from month to month.
When energy and food are excluded, the inflation gauge saw a 0.6 percent increase. Both increases were higher than forecast considering that gas prices came down for the month.
Increases in medical care, food, and shelter drove inflation for August. The CPI has increased by 8.3 percent over the past year.
Though the average hourly wage adjusted for inflation saw a 0.2 percent increase last month, hourly earnings were 2.8 percent lower than the same period last year.
According to Dow Jones, economists expected headline inflation to decrease by 0.1 percent, and core inflation to go up by 0.3 percent. Year-over-year forecasts for headline and core inflation called for 8 percent and 6 percent increases, respectively.
During August, energy prices were 5 percent lower, owing to a 10.6 percent decrease in the gasoline index. But there were increases in other areas.
For instance, the food index saw a 0.8 percent increase last month. Meanwhile, shelter costs rose 0.7 percent and are 6.2 percent higher than last year. Shelter costs make up nearly one-third of the CPI.
Medical services rose 0.8 percent in August and were 5.6 percent higher than in August 2021. Meanwhile, the prices of new vehicles also were higher, climbing 0.8 percent. But, used vehicle prices fell by 0.1 percent.
Once news of August inflation was released, markets declined. As of 3:45 p.m. EDT, the Dow Jones Industrial Average shed 1,323.77 points on Tuesday and stood at 31,057.57, losing 4.09 percent. The Nasdaq also suffered losses, shedding 650 points to 11,616.28, or a 5.30 percent decline. The S&P 500 was also lower at 3,929.88, losing 180.53 points by mid-afternoon Tuesday, or a 4.39 percent decline.
Two-year Treasury yields were higher on Tuesday, increasing to 3.704 percent, or a 0.13 percent point increase. The yield is tied to Federal Reserve rate movements.
Overall, August’s inflation report is mixed. Gas prices peaked above $5 during the summer but have retreated. But the cost of living has increased and along with that, concerns that it will get worse. Bread prices increased 2.2 percent in August and is 16.2 percent higher than last August. Eggs have seen a 39.8 percent increase over the past year and were 2.9 percent higher last month. Meanwhile, canned fruit increased 3.4 percent in August and are 16.6 percent higher in a year-to-year comparison.
In better news, airline travel is still running lower and cost 4.6 percent less in August. But, it’s still 33.4 percent higher than last year at the same time.
Investors have been anticipating that the Reserve will move to enact a 0.75 percentage point increase in rates at its September meeting next week. Thus far in 2022, the Federal Reserve has increased the benchmark interest rate by a total of 2.25 percentage points.