Consumer prices rose 3.7% in August compared to a year ago, marking the second consecutive month of increased inflation and suggesting a bumpy path in the effort to bring inflation back down to normal levels, government data on Wednesday showed.
The fresh data follows an uptick in July that reversed some of the progress achieved in the fight to cut price increases and offer relief for household budgets.
The data exceeded economist expectations that consumer prices would have increased 3.6% in August compared to a year ago, an increase from the inflation rate recorded in July. That month, the inflation rate ticked up on a year-over-year basis for the first time since last summer.
Inflation stands well below its peak last year of over 9% but remains more than a percentage point higher than the Federal Reserve’s target rate.
Core inflation — a measure that strips out volatile food and energy prices — rose 4.3% in July compared to a year ago, in part because gasoline prices were a major contributor to the jump in overall inflation.
Consumer prices increased a significant 0.6% in August compared to the previous month, far outpacing the month-over-month inflation rate in July, according to the data released on Thursday by the Bureau of Labor Statistics.
An increase in gasoline prices contributed to more than half of the month-to-month price increases, the data showed. The national average price of a gallon of gas stands at $3.85, AAA data said.
Price increases for food and housing also contributed to the inflation spike compared with last month.
The prices of some grocery store items remain well above the overall inflation rate. The price of biscuits and rolls rose 7% in August compared to a year ago; while the price of cookies rose 8% and uncooked beef rose 10%.
At the Federal Reserve’s most recent meeting in July, the central bank raised its benchmark interest rate a quarter of a percentage point, reviving its aggressive inflation fight despite the slowdown of price hikes.
Speaking at a press conference in Washington, D.C., that month, Fed Chair Jerome Powell downplayed the progress achieved so far in reducing inflation.
“Inflation has moderated somewhat since the middle of last year,” Powell said. “Nonetheless, the process of getting inflation back down to 2% has a long way to go.”
The next decision from the Federal Reserve about a possible rate increase will take place next week.
An additional rate hike could help bring down prices by further slowing the economy and reducing demand, but the move risks ultimately tipping the U.S. into a recession.
So far, the rate hikes appear to have slowed but not imperiled the nation’s economic growth.
While hiring held steady in August with the U.S. economy adding 187,000 jobs, a sharp downward revision of job growth estimates in June and July lowered those totals by a combined 110,000 jobs, Bureau of Labor Statistics data showed.
The mildly bad news for workers bodes well for the nation’s fight against inflation, since in theory a looser jobs market and slower pay hikes take pressure off of companies that may otherwise need to charge higher prices as means of addressing ballooning labor costs, economists previously told ABC News.
Despite the slowdown in hiring, economic growth has proven resilient.
A major upward revision of government data showed that gross domestic product increased at a 2% annualized rate for a three-month period ending in March — a sizable jump from the previous estimate of 1.3%.
Still, U.S. economic growth over the first three months of this year was slower than the 2.6% growth in the previous quarter. In turn, that performance was down from 3.2% growth in the quarter before that.
The cooldown of inflation alongside resilient economic performance has given rise to optimism among many observers that the U.S. will avert a recession.
Nearly two-thirds of forecasters surveyed by the National Association for Business Economics expressed confidence that the economy will achieve a “soft landing,” an outcome in which the U.S. brings down inflation while avoiding a recession, the organization announced last month.