“With the over-all inflation rate declining, and with wage pressures and inflation expectations contained, there are still reasons for optimism and no justification for the Fed to panic.” johncassidy on the latest report from the Labor Department.
With the announcement on Tuesday that consumer-price inflation had been higher than expected in August, the recent string of positive economic news forand the Democrats came to an end. The headline inflation rate declined from 8.5 per cent in July to 8.3 per cent last month, the latest Labor Department report shows, but the core rate, which excludes volatile energy and food prices, increased from 5.9 per cent to 6.
Cheaper gas is good news for motorists, obviously, but it also augurs well for anyone who buys food, which means practically everyone. Over the past twelve months, according to the August report, the cost of food eaten in or out of the home has risen by 11.4 per cent, the biggest annual increase since May, 1979. One of the things that propelled food prices upward was sharply higher transportation costs.
Another factor to consider is the role that rents, which make up almost a third of the C.P.I.—i.e., a huge part of it—are playing in keeping inflation high. In the past twelve months, according to the August report, rents for primary residences have risen by 6.7 per cent. On the basis of these and other factors, including a compression of profit margins as pandemic-related restrictions on supply continue to ease, Shepherdson is predicting that by March of next year the core inflation rate will have dropped from 6.3 to 4.8 per cent. He also cited Wednesday’s release of the Producer Price Index for August, a separate report, which showed that prices at the wholesale level fell slightly over the month, and increased by 8.
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