The cost of living in United States unexpectedly fell in August for the first time in 16 months, and the annual inflation rate retreated to the lowest level in five months, the US Labor Department reported Wednesday, Sept. 17, in Washington.
Food prices continue to pressure Americans’ paychecks, but they eased some from the prior month and gains for grocery store items were offset by declines in gasoline, fuel oil, clothing, used cars and trucks, and transportation.
With forecasts missed as most hovered on unchanged, consumer prices dropped 0.2% in August after climbing 0.1% in July. The inflation figure was published by the Labor Department’s Bureau of Labor Statistics (BLS) within its monthly report on the Consumer Price Index (CPI). The CPI measures the change in prices that consumers pay for goods and services throughout the United States. Consumer prices last retreated in April 2013*.
Within the CPI, food prices rose 0.2% and are 2.7% higher than a year ago. They have advanced in every month this year, peaking at 0.5% in May for the biggest gain since August 2011. Notably, beef and veal rose 4.2% last month for the largest increase since November 2003.
Energy prices have declined for two straight months following sharp pick-ups in April, May and June. They fell 2.6% last month, led by a 4.1% drop in gasoline. From a year ago, energy costs are up 0.4% but prices at the pump are down 2.8%,
Stripping out energy and food, which economists like to do as the categories are more volatile, so-called core consumer prices were unchanged in August. It was the first time since October 2010 that they failed to increase. Gains of 0.1% happened in each of the two prior months. As recently as May, the core monthly inflation rate jumped 0.3% for the biggest increase since August 2011.
"With overall prices down in August, and core prices flat, there are still no indications of increasing inflationary pressures," PNC Financial Services Chief Economist Stuart Hoffman and senior economist Gus Faucher, said in an analysis.
"The drop in energy prices as geopolitical tensions in the Middle East and Russia and Ukraine have eased somewhat is also putting downward pressure on inflation."
Core advancing items included:
- Shelter, up 0.2% compared to 0.3% previously
- Rent, up 0.2% compared to 0.3% previously
- Lodging away from home, up 0.8% compared to 2% previously
- New vehicles, up 0.2% compared to 0.3% previously
- Dairy and related products, up 0.6% compared to 0.3% previously
- Meats, poultry, fish, and eggs jumped 1.5% compared to 0.3% previously
Core declining items included:
- Medical care commodities, down 0.1% after gaining 0.3% previously
- Clothing, down 0.2% after gaining 0.2% previously
- Used cars and trucks, down 0.3% to match the prior month
- Airfares, down 4.7% after dropping 5.9% previously. They had surged 10.9% over the previous 5 months ended June.
- Household furnishing, down 0.3% compared to 0.1% previously
Tobacco and medical care services prices were flat last month.
US inflation increased 1.7% over the last 12 months after advancing 2% previously. At 2.1% in the 12 months ended in May and in June, annual inflation rates peaked to the highest since October 2012. Other annual US inflation rates reported by the BLS this year include gains of 2% in April, 1.5% in March, 1.1% in February and 1.6% in January.
Core US inflation also climbed 1.7% in the year-over-year period ended August. They were 1.9% in each of the previous two months. Other core 12-month inflation rates reported in 2014 include the April increase of 1.8%, the March advance of 1.7% and the matching 1.6% gains in February and in January. The core reading is the benchmark inflation figure monitored by the Federal Open Market Committee (FOMC) as it helps in deciding where to set the key interest rate. The latest annual increase of 1.7% is below the Fed’s 2% annual inflation target.
"Inflation is certainly benign," said Brian Jones, a senior U.S. economist at Societe Generale in New York, who correctly forecast the drop in prices. "Inflation is not a front-burner issue" for Fed policy makers. "The doves have the high ground on this one," he said, referring to central bankers who are less concerned about inflation. "They are not going to do anything with rates for a long time."
Inflation data tabled below offers recent monthly and annual percentage changes in prices of consumer goods and services that were surveyed and analyzed by the Bureau of Labor Statistic.
February 2014 – August 2014 Consumer Prices – Gains & Losses in Percent
|Feb 2014||Mar 2014||Apr 2014||May 2014||June 2014||July 2014||Aug 2014||12 Month|
|Food at home||0.5||0.5||0.4||0.7||.0||0.4||0.2||2.9|
|Food away from home||0.3||0.3||0.3||0.2||0.2||0.3||0.2||2.5|
|Gasoline (all types)||-1.7||-1.7||2.3||0.7||3.3||-0.3||-4.1||-2.8|
|Utility (piped) gas service||3.6||7.5||0.3||-1.7||-2.6||-0.4||-2.8||5.8|
|All items less food, energy||0.1||0.2||0.2||0.3||0.1||0.1||.0||1.7|
|Commodities less food, energy||-0.1||.0||0.1||0.1||0.1||.0||-0.1||-0.4|
|Used cars and trucks||-0.1||0.4||0.5||-0.1||-0.4||-0.3||-0.3||.0|
|Services less energy||0.2||0.3||0.3||0.3||0.1||0.1||.0||2.5|
Inflation information from the Bureau of Labor Statistic is published monthly, typically about two weeks into a new month. It details consumer prices through to the previous month. Data for September inflation via the Consumer Price Index (CPI) and BLS summary report is scheduled for public release on October 22, 2014.
CPI data is needed to calculate US inflation rates and is the backbone for this site’s inflation-adjusting calculator. The US Inflation Calculator shows accumulated inflation and the change in buying power of the US dollar between two dates.
*Consumer prices in October 2013 were revised to unchanged from an initial published decline of 0.1%.
Funny thing – the fed stops doing QE / printing money and the value of money normalizes.
Its not really normal for the value of your dollar to be almost 200% lower than it was in the year 1980 but I know what you’re saying. In reality the interest rate will have to skyrocket in order for our dollar’s VALUE to normalize.