Inflation exhibited an upward trend in August, according to a report from the Labor Department. This marks the second consecutive month that the consumer price index has risen. [Source]
The U.S. Labor Department highlighted in its August report that consumer prices increased by 0.6% compared to the previous month. This is the steepest monthly increase observed this year. On an annual basis, the price hike reached a concerning 3.7%, up from July’s 3.2%.
Gasoline prices, essential for the average American, surged by a startling 10.6% in August, accounting for over half of the Consumer Price Index (CPI) increase. Gas prices have been rising for months as OPEC+ continues to reduce oil production. [Source]
U.S. households, especially those in the lower-income bracket, are feeling the sting of inflation. The purchasing power of the average American worker diminished last month, with average hourly earnings dropping by 0.5%.
While gasoline prices were a significant driver of the inflation surge, shelter costs also played a part. Shelter costs rose by 0.3% for the month, marking a staggering annual increase of 7.3%.
Robert Frick, a corporate economist at Navy Federal Credit Union, commented, “This was bad news for Americans who feel inflation most acutely when writing their rent check.”
Although some predict relief in shelter costs, it might not come soon enough for those hardest hit by inflation’s effects.
Regarding food, grocery costs rose by 0.2% in August, representing a 3% increase year-on-year. [Source]
Automobiles, health insurance, airline tickets, and even daily household necessities experienced noticeable price hikes.
Even though inflation has decreased from a peak of 9.1%, it remains significantly above the Fed’s 2% target. Over the past 16 months, the U.S. central bank has authorized 11 rate hikes.
Policymakers are anticipated to hold off on an interest rate hike in their upcoming September meeting. However, the unanticipated surge in inflation might set the stage for another rate hike before year’s end.
“It’s likely that the Fed stays on hold for this month. Unfortunately, an increase in inflation — especially one that is unexpected — leaves the door open for the Fed to raise rates again before the end of the year,” said Chris Zaccarelli, the Chief Investment Officer for Independent Advisor Alliance.
As Biden lauds his economic strategies, it’s evident that the outcomes aren’t aligning with his expectations. Following the Labor Department’s job and CPI reports, data suggests that the U.S. economy is trending downward. [Source]
This scenario poses significant challenges for the Biden administration. Given that inflation rates are substantially above pre-pandemic levels and with pivotal policy decisions looming, the economic outlook remains clouded in uncertainty.
Are “Bidenomics” addressing the root causes of this inflationary trend or merely applying short-term fixes?