Christopher Rogaber Associated Press – September 13, 2022 / 5:48 am | Story: 384925
Photo: The Canadian Press
File- A customer pumps gas into his car at Sam’s Club, Madison, on May 24, 2022.
Sharp declines in gas prices and cheap used cars slowed US inflation in August for the second month in a row, although prices for many other items rose, indicating that inflation remains a heavy burden on American households.
On Tuesday, the government said consumer prices rose 8.3% in August from a year earlier. Although still painfully high, it is down from an 8.5% jump in July and a four-decade high of 9.1% in June. On a monthly basis, prices rose 0.1% after a flat reading in July.
Excluding volatile food and energy categories, so-called core prices jumped 0.6% from July to August, higher than many economists had expected and a sign of persistent inflation.
Inflation remains much higher than many Americans have ever seen and continues to put pressure on the Federal Reserve, the agency tasked with maintaining price stability. The Federal Reserve is expected to announce another significant increase in its benchmark interest rate next week, which will drive up the costs of many consumer and business loans.
Inflation has spiked household grocery bills, rent and utility costs, among other expenses, causing hardship for many families and deepening gloom about the economy despite strong job growth and low unemployment.
Even if inflation peaks, economists expect it could take two years or more to fall back to a level close to the Federal Reserve’s annual target of 2%. The cost of renting apartments and other services, such as healthcare, will likely continue to rise in the coming months.
Republicans have sought to make inflation a central issue in midterm congressional elections. They blame President Joe Biden’s $1.9 trillion stimulus package last year for most of the increase. Many economists generally agree, although they also say faltering supply chains, the Russian invasion of Ukraine, and widespread shortages of items such as semiconductors were major factors in rising inflation.
However, indications that inflation may have peaked – or will soon arrive – could boost Democrats’ odds in the midterm elections, and may have already contributed to Biden’s slightly higher acceptance rates. In his speeches, Biden generally stopped referring to the impact of higher prices on family budgets. Instead, he highlighted his administration’s recent legislative accomplishments, including a law enacted last month aimed at lowering drug prices and combating climate change.
Nationally, the average cost of a gallon of gas fell to $3.71, down from just over $5 in mid-June. Several companies also reported signs that the backlog of supplies and inflation were fading.
General Motors said the pandemic disruptions in overseas semiconductor production, which led to a decline in auto production, have largely dissipated and that overall supply chain disruptions have improved by about 80% from the worst days of the pandemic.
Over the past year, the prices of meat, milk, fruits and vegetables have increased by a double. But executives at Kroger, the nation’s largest grocery chain, said lower prices for agricultural commodities such as wheat and corn could slow food cost increases.
Next week, most Fed watchers expect the central bank to announce a third consecutive increase of three-quarters of a point, to a range of 3% to 3.25%. Rapid increases in the federal interest rate — the fastest since the early 1980s — usually raise the costs of mortgages, auto loans and business loans, with the goal of slowing growth and reducing inflation. The average 30-year mortgage rate jumped nearly 5.9% last week, according to mortgage buyer Freddie Mac, the highest number in nearly 14 years.
Chairman Jerome Powell said the Fed will need to see several months of lower inflation readings indicating that rate increases are sliding back toward its 2% target before he suspends rate hikes.
Wages are still rising at a solid pace – before adjusting to inflation – driving up demand for apartments as more people go out on their own. The shortage of available housing has also forced more people to keep renting, which has intensified competition for apartments.
Rising rents and more expensive services, such as Medicare, have also driven up inflation.