Consumer prices rose slightly in August despite a steep decline in the cost of gasoline, according to inflation data released Tuesday by the Labor Department.
The consumer price index (CPI), a closely watched gauge of inflation, rose 0.1 percent in August after staying flat in July.
Economists expected the steady decline in gas prices throughout last month to lead to a 0.1 percent decline in monthly inflation, according to consensus estimates. But prices for food, electricity and a broad range of other products kept rising, leading to a slight increase in the monthly inflation rate.
While the annual inflation rate still fell to 8.3 percent in August from 8.5 percent in July, sharp increases in prices for food and household staples will likely be a cause of concern for the Federal Reserve and other policymakers.
“Today’s higher-than-expected CPI reading shows that we still have a long way to go before inflation returns to more normal levels,” said Scott Brave, lead consumer spending economist at Morning Consult, in a Tuesday analysis.
“While the recent decline in gas prices has provided a welcome reprieve for consumers, it represents just one part of the larger consumer basket, and prices for much of that basket continue to increase at rates that far exceed incomes.”
Food prices on the whole rose 0.8 percent in August, with prices for groceries and other store-bought food items up 0.7 percent. Prices for food have risen 11.4 percent over the past 12 months, the largest annual increase since May 1979.
Prices for goods and services other than food and energy, which economists call “core inflation,” rose 0.6 percent on the month after rising just 0.3 percent in July. The Fed sees rising core inflation as a better gauge of overall price growth in the U.S., because it removes volatile swings in food and energy prices.
“Gas prices are volatile and erratic. A jump in gas prices over the winter could take us right back to the higher inflation readings seen earlier this year,” wrote ZipRecruiter chief economist Sinem Buber in a Tuesday analysis.
“Since core inflation … is a better predictor of future inflation, this is concerning,” she continued.
The cost of shelter, which includes rents, rose 0.7 percent in August, and prices for medical care services rose 0.8 percent last month. Prices for new vehicles rose 0.8 percent, but used car and truck prices fell 0.1 percent.
Updated at 9:33 a.m.
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