Used cars drive consumer prices up in August

Used cars drive consumer prices up in August

The consumer price index (CPI) added 0.4 percent in August following an increase of 0.6 percent in July, the Labor Department said on Friday, this showed the third month in a row of expansions in consumer prices.

Last month, gasoline prices rose 2.0% after increasing 5.6% in July.

Policymakers have expressed a range of ideas about how this might work in practice, but agree the aim is to let prices rise fast enough that households and businesses take their inflation target seriously.

Airfares climbed another 1.2% after posting the biggest monthly gain in 21 years in the prior month, though prices remained 23.2% below year-earlier levels with passenger counts still depressed.

However, the prices of housing, water, electricity, gas, and other fuels fell by 0.42%; communication by 0.02%; miscellaneous goods and services by 1%; and restaurants and hotels by 0.32% in August 2020 compared to the same month of 2019.

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In the 12 months through August, the core CPI climbed 1.7% after rising 1.6% in July.

The bounceback in consumer prices over the summer came as states reopened their economies and weathered a resurgence in coronavirus cases. The US central bank in August rewrote its framework, putting new emphasis on the labor market and less on worries about too-high inflation. Motor vehicle production closed completely during the spring as the pandemic shut down wide swaths of the economy.

Used-vehicle prices, for example, rose 5.4% in August, accounting for 40% of the increase in core prices, the Labor Department said.

The cost of food consumed at home fell 0.1% after dropping 1.1% in the prior month.

Even with the recent gains in consumer prices, Federal Reserve policy makers have seen little threat of inflation and expect to hold interest rates near zero for the foreseeable future. On a non-seasonally adjusted basis, the overall consumer-price index rose 1.3% in August from a year earlier and core prices increased 1.7% over the year. The prices of furnishings, household equipment, and routine household maintenance also rose by 0.23%. Still, the three main US stock indexes were headed for a second straight weekly decline as recent economic indicators suggested a long and hard recovery from the pandemic.

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