US consumer prices rose at a more moderate pace in August, in a sign that inflationary pressures associated with the economic reopening from Covid-19 lockdowns are easing slightly while remaining near a 13-year high.
The consumer price index published by the Bureau of Labor Statistics on Tuesday rose 5.3 per cent in August from a year ago — just below the 5.4 per cent level reported previously, which is the highest since 2008, and in line with the 5.3 per cent forecast by economists.
Month-over-month price gains slowed, with an increase of 0.3 per cent from July. That is markedly lower than the 0.9 per cent jump reported between May and June and a drop-off from the most recent 0.5 per cent rise from June to July.
“Core” CPI, which excludes volatile items such as food and energy, also decelerated. On a year-over-year basis, it climbed 4 per cent compared to 4.3 per cent in July. The monthly pace also fell to 0.1 per cent.
Most of the price gains seen so far this year have stemmed from sectors most sensitive to supply bottlenecks and other pandemic-related disruptions. While the pace of inflation is hovering around multiyear highs, July’s data showed the first signs that the increases were abating — especially for used car and truck prices and travel expenses, which have driven a substantial part of the increase.
The latest CPI reading offered further confirmation that inflation could be starting to peak.
Tuesday’s report was watched closely for any indication of how the inflation outlook has been affected by the more contagious Delta coronavirus variant, which has driven up cases globally and prompted some countries to tighten restrictions again.
Renewed constraints have hit supply chains, and economists are attuned to whether signs of flagging consumer confidence and business activity mean the rebound will be more modest than initially anticipated.
Consumers are braced for higher inflation to continue, with expectations over the short and medium-term now at the highest level since 2013 when the survey was first launched, according to data published by the New York branch of the Federal Reserve on Monday.
Over the next year, consumers anticipate inflation of 5.2 per cent, up 0.3 percentage points from July in the tenth consecutive monthly increase. Over a three-year horizon, they expect gains of 4 per cent.
Policymakers have also been looking for any evidence that inflationary pressures are broadening, with a specific focus on housing costs. Federal Reserve officials are debating when to begin scaling back the $120bn asset purchase programme put in place last year to support financial markets and protect against a more pronounced economic contraction.
The central bank set out two thresholds to meet before withdrawing or “tapering” that support, including “substantial further progress” towards 2 per cent inflation and maximum employment. Officials agree that the first of these goals has already been met.
No taper announcement is expected at the Fed’s upcoming policy meeting next week, especially after August’s lacklustre jobs report. Most of the economists surveyed in the latest poll conducted in partnership with the Financial Times by the Initiative on Global Markets at the University of Chicago Booth School of Business are readying for a move at the bank’s November gathering.
Source: Economy - ft.com
