The latest data from the Bureau of Labor Statistics reveals that the consumer price index (CPI) for August 2024 increased by 2.5% compared to the previous year. This marks the lowest annual inflation rate since February 2021. Despite the overall downward trend in inflation, certain sectors, particularly housing, continue to experience elevated prices.
The August CPI figure shows a decrease from July’s 2.9%, reflecting a continued easing of inflationary pressures that have been prevalent since the pandemic. “Overall inflationary pressures are diminishing,” noted Sarah House, senior economist at Wells Fargo Economics.
Though inflation is generally subsiding, some areas, such as housing, remain problematic. However, prices for essential items like groceries and gasoline have become more stable. The Federal Reserve is anticipated to begin lowering interest rates in response to the moderated inflation and to support economic growth.
The CPI’s August reading is a significant drop from the 9.1% peak observed in mid-2022 and is nearing the Federal Reserve’s long-term target of approximately 2%. Paul Ashworth, chief North America economist at Capital Economics, mentioned that while inflation has been significantly reduced, it is not entirely resolved due to persistent housing inflation.
The Federal Reserve is likely to cut interest rates by 0.25 percentage points at its next meeting, as it shifts focus from controlling inflation to preventing a recession amid a cooling job market. Interest rates had been raised to their highest level in 23 years to combat inflation during the pandemic.
Housing remains a significant concern, with the shelter index rising by 5.2% since August 2023, contributing to more than 70% of the annual increase in core CPI. Despite recent fluctuations, broader rental market trends show minimal inflation.
Other categories with notable price increases over the past year include motor vehicle insurance, medical care, recreation, and education. For instance, motor vehicle insurance prices have surged by 16.5%, partly due to higher costs associated with insuring more expensive cars.
Consumer prices saw a modest 0.2% rise in August, with core inflation slightly exceeding expectations. While some price pressures, like those on eggs and gasoline, have been recent concerns, overall grocery inflation has eased significantly from the highs of 2022.
Inflation Breakdown for August 2024
| Category | Inflation Rate |
|---|---|
| Overall Inflation Rate | 2.5% |
| Food | 2.1% |
| Food at Home | 0.9% |
| Eggs | 28.1% |
| Frozen Noncarbonated Juices & Drinks | 18.3% |
| Frankfurters | 11.0% |
| Dried Beans, Peas & Lentils | 6.8% |
| Uncooked Beef Roasts | 6.7% |
| Butter | 6.7% |
| Pork Chops | 5.0% |
| Uncooked Ground Beef | 4.9% |
| Other Fats & Oils including Peanut Butter | 4.7% |
| Olives, Pickles, Relishes | 4.2% |
| Oranges (Including Tangerines) | 4.1% |
| Tomatoes | 3.9% |
| Baby Food & Formula | 3.7% |
| Sugar (Including Substitutes) | 3.6% |
| Fresh Whole Milk | 3.0% |
| Crackers, Bread & Cracker Products | 2.8% |
| Food Away from Home | 4.0% |
| Limited Service Meals & Snacks | 4.3% |
| Vending Machines & Mobile Vendors | 4.0% |
| Energy | -4.0% |
| Electricity | 3.9% |
| All Items Less Food & Energy | 3.2% |
| Motor Vehicle Insurance | 16.5% |
| Photographic Equipment & Supplies | 14.7% |
| Video Discs & Other Media | 14.3% |
| Gardening & Lawncare Services | 13.5% |
| Cigarettes | 9.3% |
| Checking Account & Other Bank Services | 8.9% |
| Veterinarian Services | 7.6% |
| Care of Invalids & Elderly at Home | 7.4% |
| Admission to Sporting Events | 7.2% |
| Day Care & Preschool | 6.2% |
| Hospital (Including Related Services) | 5.8% |
| Laundry & Dry Cleaning Services | 5.7% |
| Indoor Plants & Flowers | 5.6% |
| Postage & Delivery Services | 5.5% |
| Tax Return Preparation & Other Accounting Fees | 5.4% |
| Motor Vehicle Maintenance & Servicing | 5.1% |
| Rent of Primary Residence | 5.0% |
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