The July consumer price index numbers offered a glimmer of hope that inflation in the U.S. had started to slow. In June, consumer prices had been up 9.1% year over year. July’s CPI increased at a slower pace, 8.5.% year over year. The new August figures, released on Sept. 13, looked even better at first blush, up by an even smaller 8.3%. Numbers can mislead, however. Most of the improvement in August, same as in July, came from the sharply dropping cost of oil, gas, and heating oil. Otherwise, raging inflation remained.
Oil prices have been the saving grace for Americans trapped in the vice of rising prices. The cost of a gallon of regular gas nationwide three months ago hit $5. That has decreased to $3 per gallon. Still, compared to last year, the price of fuel oil is soaring.
As the drop compared to previous months steepened, a false sense of what Americans pay for their daily lives set in, but only briefly.
A look at the August CPI report from the Bureau of Labor Statistics shows dozens of items the prices of which rose by above 15% year over year. Oil and gas remained at the top because they were so inexpensive in August 2021, but the story last month revolves around food prices. As an example, the cost of butter rose 25%. The cost of eggs jumped 40% year over year. (Inflation can be a greater for those with lower income. These are America’s poorest towns.)
What happens next? The Federal Reserve has raised interest rates at a brisk pace. These rate hikes included a 0.75% increase in March and another in May. This next rate jump will be the same, almost certainly. This will put to the test the theory that rising rates cools inflation.
Perhaps the only antidote to inflation comes with higher unemployment, and thus, a slackening of consumer demand. Prominent economist and former Treasury Secretary Larry Summers believes the jobless rate will need to rise to over 5% for five years (explaining this could mean five years of 6% unemployment or two years of 7.5% unemployment or one year of 10% unemployment) to contain the rampant surge in the prices of so many goods and services. (Over the long term, here are cities where wages will rise the most by 2060.)
To determine the 40 household items that are soaring in price, 24/7 Wall St. reviewed the BLS’ Consumer Price Index Summary August report. Prices are compared to August 2021.
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