Economy

US consumer prices rise for third month as used car prices rise, but inflation is still low and is expected to remain the same

Numbers: Prices of U.S. goods and services rose sharply for the third consecutive month in August, but this increase was largely due to an increase in prices after a sharp decline in the early stages of the corona virus epidemic. Overall inflation is still very low.

Consumer price index, a measure of the cost of living, rose 0.4% last month. The government said Friday. The biggest spike index increase in the price of used cars and trucks for more than half a century is more than 40%.

Economists who voted for Markwatch predict a 0.3% improvement in the CBI. The August increase was followed by a 0.6% improvement in July and June.

During the first three months of the epidemic the prices of most goods and services, which were in high demand or in short supply, fell, with the exception of a few items such as toilet paper or meat.

Even after a three-month increase in the CPI, inflation remains low. Consumer price increases have moved from 1% to 1.3% in the last 12 months.

In contrast, at the beginning of 2020 the rate of inflation was 2.5%.

Another move that closely monitored food and energy inflation rose 0.4% last month. The annual increase in the so-called core rate has risen from 1.6% to 1.7%.

What happened: A sharp increase in the price of used cars and trucks was the biggest contributor to the rise in consumer prices last month. They rose 5.4% to mark the biggest profit in 51 years, and the exaggerated increase will soon fade. Used vehicle prices have risen by less than 1% in the past year.

Meanwhile, petrol prices rose as little as 2% in August. However, petrol is now much cheaper than it was a year ago.

Prices for home furnishings, entertainment, car insurance and airfare also rose last month, but most of these goods and services are now lower than last year.

Both rent and housing costs were slightly higher, but they did not rise rapidly due to record-low mortgage rates and high vacancies during epidemics, not to mention the ban on evictions.

The cost of rent has risen by just 2.3% in the last 12 months, the smallest annual increase since 2013.

It is noteworthy that the price of groceries is low. They increased as Americans stockpiled in the first few months of the epidemic, but prices have since leveled off.

Even after these recent increases, consumer prices have changed little since the beginning of the year. Companies are not capable of raising prices as the economy is still recovering from strikes earlier this year and millions of Americans are still unemployed.

See: Marketwatch Economic Calendar

Large image: Inflation is still performing better than the Federal Reserve’s 2% target and is not expected to cause a problem for the economy until the epidemic subsides. The central bank plans to keep interest rates very low for at least the next year or two.

What do they say? “This increase reflects the ignorance of previous occupation discounts during the worst period of the epidemic,” said Sal Quateri, senior economist at BMO Capital Markets. “Higher unemployment and increased automation should cover inflation for a while.”

Market reaction: Dow Jones Industrial Average DJIA,
+ 0.66%
And S&P500 SPX,
+ 0.50%
Rose in trading on Friday.

Thelma Binder

"Explorer. Devoted travel specialist. Web expert. Organizer. Social media geek. Coffee enthusiast. Extreme troublemaker. Food trailblazer. Total bacon buff."

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