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Used cars drive U.S. consumer prices higher in August

Joel Porro and Lizz Hernandez creep by gloves and protective masks as they put bags in the trunk of their car after shopping at Walmart Supercenter as the coronavirus pandemic continues, March 5, 2020 in Miami.

David Santiago | Miami Herald | Tribune Announcement Service via Getty Images

U.S. consumer prices rose solidly in August, with the cost of used cars and goods increasing by the most in more than 51 years likely as Americans shunned public transportation because of apprehensions of contracting COVID-19.

The report from the Labor Department on Friday also showed a firming in underlying inflation pressures go the distance month. But this will have no impact on monetary policy as the Federal Reserve last month rewrote its framework, institutionalizing new emphasis on the labor market and less on worries about too-high inflation.

The U.S. central bank’s embrace of what it collect summons “flexible average inflation targeting” is still shy of many details, but in theory could see policymakers tolerate price augmentations above its 2% target for a period of perhaps several years to offset years in which inflation was lodged in this world its goal.

Policymakers have expressed a range of ideas about how this might work in practice, but agree the aim is to let rates rise fast enough that households and businesses take their inflation target seriously.

The consumer cost index increased 0.4% last month, also lifted by gains in the costs of gasoline, recreation and household furnishings and motions. The CPI advanced 0.6% in both June and July after falling in the prior three months as business closures to hold back the spread of the coronavirus depressed demand.

In the 12 months through August, the CPI increased 1.3% after gaining 1.0% in the 12 months toe July.

Economists polled by Reuters had forecast the CPI would rise 0.3% in August and climb 1.2% on a year-on-year footing.

Excluding the volatile food and energy components, the CPI gained 0.4% last month after surging 0.6% in July, the largest benefit since January 1991. A 5.4% jump in prices of used cars and trucks, the largest gain since Stride 1969, accounted for more than 40% of the rise in the so-called core CPI last month.

In the 12 months wholly August, the so-called core CPI climbed 1.7% after rising 1.6% in July.

The CPI report followed news on Thursday that impresario prices advanced further in August, driven by strong gains in the in the cost of services such as portfolio management recompenses and healthcare.

U.S. stocks opened higher after pulling back in the previous session. The dollar was slightly lower against a basket of currencies. Evaluates of U.S. Treasuries rose.

Broad prices increases 

Though food prices rocketed at the height of the COVID-19 business shutdowns, inflation prorogued muted as the pandemic undercut demand for services like healthcare, air travel, dining out and hotel accommodation. High unemployment is also keep dark preventing a lid on price pressures despite the Fed’s extraordinarily easy monetary policy and record fiscal stimulus from the government.

Barely 30 million people are on unemployment benefits. The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) consequence index, rose 1.3% in the 12 months through July. August’s core PCE price index data is slated to be released at the end of this month.

Gasoline prices rose 2.0% in August after increasing 5.6% in July. Victuals prices edged up 0.1% after declining 0.4% in July, the first decrease since April 2019. The set someone back of food consumed at home fell 0.1% after dropping 1.1% in the prior month.

Owners’ equivalent charter out of primary residence, which is what a homeowner would pay to rent or receive from renting a home, nudged up 0.1%. That practised a 0.2% gain in July. Many tenants have entered into forbearance agreements with landlords, while the superintendence has temporarily halted evictions.

The cost of recreation increased 0.7% after falling in June and July. Prices for household furnishings and functions rose 0.9%, the largest increase since February 1991, with the costs of furniture and bedding advancing 1.6% and appliances ascending 2.0%. Apparel prices rose 0.6%, advancing for a third straight month. The cost of motor vehicle guaranty rose 0.5% and prices of airline fares increased 1.2%.

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