Consumer Prices Rose More Than Forecast in August
The cost of living in the United States rose more than projected in August on higher shelter and health-care prices, indicating that inflation continues to move toward the Federal Reserve’s goal.
The consumer-price index climbed 0.2% after being little changed the previous month, Labor Department figures showed Sept. 16 in Washington. The median estimate of economists surveyed by Bloomberg News was for a 0.1% advance. Excluding volatile food and fuel costs, the so-called core measure rose a bigger-than-forecast 0.3% from a month earlier.
Stabilizing energy prices, the diminishing influence of the strong dollar and nascent wage gains are helping to gradually push inflation higher. While most economists and investors expect the Fed to leave interest rates unchanged when policymakers meet next week, a sustained pickup in inflation would bolster the case for a hike later this year.
“We’re seeing a little bit of a tick up in core inflation,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “But most of the inflationary pressure is coming from housing rental costs and medical care costs. Other than those two categories, there really hasn’t been much change in the inflation dynamics in the past few months.”
Expenses for shelter climbed 0.3% from the prior month. Owners-equivalent rent, one of the categories designed to track rental prices, also rose 0.3%.
Prices for medical care services, which include health insurance, doctor visits and hospitalizations, increased 0.9% in August, the most since November 1990. These readings often vary from results for this category within the Fed’s preferred measure of inflation — the core personal consumption expenditures deflator. Economists attribute the discrepancy to different methodologies.
Another category covering prescription and nonprescription drugs rose 1.2% from July, the most in records dating to 2009. Health insurance costs rose 1.1%, the fastest pace since February.
Bloomberg survey estimates for the consumer price index ranged from no change to a gain of 0.2%.
The consumer price gauge increased 1.1% in the 12 months ended in August, after a 0.8% year-over-year advance the prior month.
The month-over-month gain in the core CPI measure follows a 0.1% gain in July. It increased 2.3% from August 2015, after rising 2.2% in the prior 12-month period.
The median projection in the Bloomberg survey was for the core gauge to rise 0.2% from the previous month, and to climb 2.2% from the prior year.
The Fed’s preferred gauge of inflation, which is the Commerce Department’s PCE measure, hasn’t matched the central bank’s 2% goal since April 2012. The core index rose 1.6% in July from a year earlier.
“It’s still going to be a long haul to get to the Fed’s inflation target,” said Price of Ameriprise. “They’re likely to wait a bit longer” beyond next week, he said.
Energy and food costs were both little changed in August. Americans also paid roughly the same prices for new automobiles. Clothing prices increased 0.2%.
Airfares decreased 0.1%, following a 4.9% drop in July.
The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60% of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.
The cost of living took more of Americans’ paychecks in August, a separate report from the Labor Department showed Sept. 16. Hourly earnings adjusted for inflation fell 0.1% from the prior month. They were up 1.3% over the past 12 months.
