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US consumer prices spike in August on fuel, housing costs

By AFP - Sep 14,2017 - Last updated at Sep 14,2017

Rising fuel and shelter costs drove up US consumer prices in August, a sign inflation could be gaining pace after remaining stubbornly sluggish for months, according to government data (AFP photo)

WASHINGTON — Rising fuel and shelter costs drove up US consumer prices in August, a sign inflation could be gaining pace after remaining stubbornly sluggish for months, according to government data released on Thursday.

The new figures come the week before the Federal Reserve is due to review benchmark US interest rates and could boost the position of those who support a third rate increase this year, although that would be unlikely to happen before December.

The Consumer Price Index (CPI), which tracks the cost of household goods and services, jumped 0.4 per cent last month, its biggest increase since January and a tenth of a point higher than the consensus forecast.

The energy index rose 2.8 per cent, driven in large part by a 6.3 per cent jump in gasoline prices, while costs for shelter rose 0.5 per cent, its biggest monthly gain in ten years.

On a 12-month basis, the index rose 1.9 per cent over the same month in 2016, up from 1.7 per cent last month.

Economists had been flummoxed in recent months as inflation and wage gains remained tepid despite steady job growth and economic expansion. The Fed initially wrote off stagnant and falling prices, attributing them to a series of one-off “idiosyncratic” figures, but even they were starting to look deeper.

“The spell has been broken,” Ian Shepherdson of Pantheon Macroeconomics wrote in a client note, noting that the important categories of rent, and owners’ equivalent rent, had surged.

The Labour Department also reported that hotel stays had their largest one-month price increase in 26 years, adding 5.1 per cent.

“We expect core inflation to pop higher over the next few months as prices rise for both goods and services in short supply after the hurricanes,” Shepherdson said.

Officials said it was unclear how much Hurricane Harvey was responsible for rising fuel prices in the report, but the storm certainly interrupted the flow of survey responses from some areas in Texas.

Harvey made landfall in southeast Texas on August 26, causing much of US oil production and refining capacity to shut down, driving up prices in different regions of the country. But that information did not necessarily make it into the CPI report.

Excluding the volatile food and fuel categories, core CPI was up just 0.2 per cent, in line with analyst expectations.

The year-over-year core was steady at 1.7 per cent, where it has been for the past three months.

Labour Department officials said that year-to-date, however, CPI had risen only 1.4 per cent, slower than the 1.6 per cent gain in the January-to-August period last year.

 

In other notable moves, college tuition and fees fell 0.3 per cent in August, the largest drop in 17 years, while prices for roasted coffee fell 2.4 per cent in August, the biggest decline in 15 years.

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