Relief may be in sight for United States consumers, who have seen their purchasing power eroded by blistering inflation this year.
Relief may be on the horizon for consumers in the United States who’ve grown weary of seeing their dollar stretch less and less further this year.
US consumer prices increased 0.3 percent in August, after rising 0.5 percent the previous month, the US Department of Labor said on Tuesday.
That is the slowest pace of price rises since January.
In a further sign of possible easing, consumer prices rose 5.3 percent over the past 12 months.
Prices for petrol, household furnishings and operations, food, and shelter all increased last month.
New vehicle prices rose 1.2 percent in August after increasing 1.7 percent in July, while prices for used cars and trucks, meanwhile, fell 1.5 percent in August – bringing an end to five consecutive monthly increases.
In a sign that the spread of the highly contagious Delta variant of the coronavirus may be weighing on some sectors of the economy, prices for airline fares decreased last month.
Inflation has been climbing as businesses ramp up operations en masse, triggering bottlenecks for labour, materials, and shipping.
The Producer Price Index (PPI) – which measures prices that businesses fetch for the goods and services they sell – jumped 8.3 percent in August from a year earlier, the biggest advance since the data was first measured back in 2010.
When prices rise for businesses, those costs are often passed on to consumers.
Fears have been rife all year that prices could start to spiral out of control, forcing the US Federal Reserve to raise interest rates and possibly derail the nation’s economic recovery.
But Fed Chairman Jerome Powell has been adamant that he and his fellow policymakers believe this period of higher inflation will prove transitory and eventually prices will moderate. They have credited strong annualised price increases to so-called “base effects” because this year’s price spikes are being compared to last year’s inflation readings when prices were deeply subdued during the onset of the coronavirus pandemic.
“We believe the annual rate peaked in June as the strong base effects are subsiding and wholesale price increases for used car and trucks have moderated greatly,” economists at Oxford Economics wrote in a note to clients on Tuesday.
That may, however, be of cold comfort to people in low-income households who have seen a bigger slice of their incomes eaten up by inflation, especially for purchases that can’t be put off until later, like food and energy.
Strip out food and energy, and the so-called “core” consumer price index rose 0.1 percent in August – the smallest increase since February.
“The more modest 0.1% m/m increase in core consumer prices in August will be heralded as a sign that the recent surge in inflation was transitory after all,” said Paul Ashworth, chief North America economist for Capital Economics, “although the spread of the Delta variant has put the burst of reopening inflation into reverse, there are still plenty of signs of a building cyclical inflationary pressure.”