US Inflation Rises 3.8% on 12-Month Basis, Consumer Prices Advance 0.4% in August 2011

Although the US inflation rate cooled a bit in August 2011 when compared against July 2011, consumer prices advanced for the month as Americans paid more than expected for goods and services. At the same time, US inflation over the past 12 months not only increased but the more closely watched core rate was the highest since November 2008.

The US Labor Department said consumer prices rose 0.4 percent in August after surging 0.5 percent in July. The increase was double the level of what many analysts’ expected. While gasoline prices rose at a more modest 1.9 percent rate in August versus the 4.7 percent jump in the previous month, food prices ticked up 0.5 percent after increasing 0.4 percent in July.

Federal Reserve Chairman Ben Bernanke last week said rising commodity prices had lifted inflation, but continued his and the Reserve’s stance that it would moderate over the coming months.

"Higher gasoline and food prices translated directly into increased inflation for consumers, and in some cases producers of other goods and services were able to pass through their higher costs to their customers as well. In addition, the global supply disruptions associated with the disaster in Japan put upward pressure on motor vehicle prices. As a result of these influences, inflation picked up significantly; over the first half of this year, " Bernanke said September 8 in a speech at the Economic Club of Minnesota.

"However, inflation is expected to moderate in the coming quarters as these transitory influences wane. In particular, the prices of oil and many other commodities have either leveled off or have come down from their highs. Meanwhile, the step-up in automobile production should reduce pressure on car prices. Importantly, we see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy."

The core US inflation rate, which strips out volatile food and energy prices, rose by an expected 0.2 percent in August to match the prior month. Core consumer goods and services that advanced include gains of:

  • 1.1 percent for clothes,
  • 0.9 percent for used cars,
  • 1.1 percent for airline fares,
  • 0.5 percent for tobacco,
  • 0.3 percent for medical care services and
  • 0.2 percent for both shelter and transportation.

US inflation rose 3.8 percent in the 12 months ending in August after having climbed 3.6 percent in each of the year-over-year gains ending in May, June and July. The level was at 1.1 percent as recently as November and hit a record low of 0.6 percent in October 2010.

"The 12-month change in the all items index edged up to 3.8 percent after holding at 3.6 percent for three months, while the 12-month change for all items less food and energy reached 2.0 percent for the first time since November 2008," the US Labor Department said in its Consumer Price Index (CPI) report. "The energy index has risen 18.4 percent over the last year, while the food index has increased 4.6 percent."

The 12-month core rate of 2.0 percent — the biggest in nearly three years, compares to the 1.8 percent reading in the previous month. The longer term core inflation index is the one most watched by the Federal Reserve. The core index stands at the top of the Fed’s target range which is often cited from 1.5 to 2.0 percent.

“The continued rise in inflation in August is another reason to suspect that the Fed will shy away from a further round of quantitative easing for the time being, even though the incoming data on the real economy continues to disappoint,” CNNMoney.com quoted Paul Ashworth, chief U.S. economist for Capital Economics.

US Labor Department inflation data on a 12-month basis and between February and August follows:

August 2011 Consumer Prices – Gains (percent)

Feb
2011
Mar
2011
Apr
2011
May
2011
June
2011
July
2011
Aug
2011
12
Month
All items 0.5 0.5 0.4 0.2 -0.2 0.5 0.4 3.8
  Food 0.6 0.8 0.4 0.4 0.2 0.4 0.5 4.6
    Food at home 0.8 1.1 0.5 0.5 0.2 0.6 0.6 6.0
    Food away from home 0.2 0.3 0.3 0.2 0.3 0.2 0.4 2.7
  Energy 3.4 3.5 2.2 -1.0 -4.4 2.8 1.2 18.4
    Energy commodities 4.8 5.5 3.1 -1.9 -6.3 4.3 1.6 32.1
      Gasoline (all types) 4.7 5.6 3.3 -2.0 -6.8 4.7 1.9 32.4
      Fuel oil 5.8 6.2 3.2 -0.8 -2.2 -1.7 -0.4 35.4
    Energy services 1.1 0.2 0.6 0.6 -1.1 0.4 0.4 1.0
      Electricity 0.4 0.7 0.2 0.8 -1.6 0.8 -0.1 1.9
      Utility (piped) gas service 3.4 -1.4 1.9 -0.3 0.4 -1.2 2.2 -2.0
  All items less food, energy 0.2 0.1 0.2 0.3 0.3 0.2 0.2 2.0
    Comm. less food, energy 0.2 0.1 0.4 0.5 0.5 0.3 0.4 2.1
      New vehicles 1.0 0.7 0.7 1.1 0.6 .0 .0 3.8
      Used cars and trucks 0.1 0.8 1.2 1.1 1.6 0.7 0.9 5.4
      Apparel -0.9 -0.5 0.2 1.2 1.4 1.2 1.1 4.2
      Medical care 0.7 0.5 0.5 .0 -0.1 .0 0.1 3.0
    Services less energy 0.2 0.2 0.1 0.2 0.1 0.2 0.2 1.9
      Shelter 0.1 0.1 0.1 0.2 0.2 0.3 0.2 1.6
      Transportation 0.5 0.5 0.2 0.1 -0.3 -0.1 0.2 3.1
      Medical care 0.4 0.1 0.3 0.3 0.3 0.3 0.3 3.3

 

The US Labor Department has scheduled the September 2011 Consumer Price Index release for October 19, 2011 at 8:30 AM Eastern Time. Current and historic CPI files are used as the core data in the US Inflation Calculator.

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