Home Economic Trends Core Consumer Prices Up 2.4 Percent, Fastest Since 2008 – Robert Hughes...

Core Consumer Prices Up 2.4 Percent, Fastest Since 2008 – Robert Hughes (09/13/2019)

The Consumer Price Index rose 0.1 percent in August and is up 1.7 percent from a year ago. The volatile food and energy components had contrasting results, with food prices unchanged for the month while energy prices fell 1.9 percent. In the food category, prices for food for home consumption fell 0.2 percent and are up 0.5 percent from a year ago while prices for food away from home, primarily restaurants, rose 0.2 percent in August and are up 3.2 percent over the past year. Restaurant prices have been one of the most persistent gainers in recent years.

Among the energy components’ prices in August, commodities were down 3.3 while services fell 0.2 percent. Over the past year, energy-goods prices have decreased 7.1 percent while energy-services prices have fallen 0.8 percent.

The measure excluding food and energy, the core CPI, rose 0.3 percent in August, as in the two previous months, and is up 2.4 percent from a year ago, the fastest 12-month gain since 2008 (see chart). Within the core, goods prices rose 0.2 percent in August and are up a modest 0.8 percent from a year ago. While the 0.8 percent increase is very mild, it is up sharply from the 1.0 percent decline for the 12 months through October 2017 (see chart). Tobacco products, used cars and trucks, and alcoholic beverages are among the contributors to faster core-goods price increases.

Core-services prices rose 0.3 percent in August and are up 2.9 percent from a year ago (see chart). The main contributors to services-prices increases have been shelter (up 3.4 percent from a year ago) and medical care (up 4.3 percent), particularly health insurance (up 18.6 percent) — and education (up 2.6 percent). More recently, postage and delivery services (up 5.4 percent), fees for lessons (up 3.8 percent), pet services (up 4.2 percent), motor vehicle maintenance and repair (up 3.8 percent), and household services (up 5.4 percent) all likely reflect the tight labor market.

Price pressures vary widely among the various parts of the economy, but overall price increases have accelerated over the past few months though they remain modest by historical measures.