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... U.S. consumer prices accelerated in August, while a key measure of underlying inflation posted its largest increase in four months, reinforcing expectations that the Federal Reserve will raise interest rates next week. ...
"Energy inflation does not stay at the gas station. It travels by truck, airplane and cargo ship into nearly every store in America," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. "The Fed is now more likely than not to raise its policy rate ... it cannot afford to let an energy shock become an everything shock."
The CPI increased 0.4% last month after edging up 0.1% in July, the Labor Department's Bureau of Labor Statistics said.
In the 12 months through August, consumer inflation advanced 3.4% after rising by the same margin in July. The rise in the CPI was in line with economists' expectations.
A 3.9% jump in gasoline prices after two straight monthly declines accounted for more than a third of the increase in the CPI over the month. Other motor fuels, which include diesel, surged 9.6%. They surged 44% year-on-year in August.
There was, however, some respite for consumers at the supermarket. Food prices edged up 0.1% for a second straight month. Grocery prices were unchanged amid muted increases in the costs of meat and fish. Fruit and vegetable prices fell 0.4% over the month, weighed down by a 6.2% drop in the cost of lettuce because of a Cyclospora outbreak.
But egg prices increased 2.9%, while nonalcoholic beverages cost more, as did dairy and related products. Food prices advanced 2.7% year-on-year in August and the annual increase in consumer inflation is outpacing wage growth. Inflation-adjusted average hourly earnings fell 0.3% over the year in August.
"Inflation-adjusted wage growth contracted for a fifth consecutive month in August," said Gregory Daco, chief economist at EY-Parthenon. "This is the longest income squeeze since 2012 -- excluding the post-pandemic period when public assistance kept income growing despite historical job losses." ...
