U.S. consumer prices rose less than expected in August as increases in gasoline and rents were offset by declines in healthcare and apparel costs, and underlying inflation pressures also appeared to be slowing.
The Labor Department said on Thursday its Consumer Price Index increased 0.2 percent last month after a similar gain in July. In the 12 months through August, the CPI increased 2.7 percent, slowing from July’s 2.9 percent rise.
Excluding the volatile food and energy components, the CPI edged up 0.1 percent. The so-called core CPI had increased by 0.2 percent for three straight months. In the 12 months through August, the core CPI increased 2.2 percent after rising 2.4 percent in July.
Economists polled by Reuters had forecast the CPI climbing 0.3 percent and the core CPI gaining 0.2 percent in August.
Despite the moderation in price increases last month, inflation pressures are steadily building up, driven by a tightening labor market and robust economic growth.
The Federal Reserve tracks a different inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, for monetary policy. The core PCE price index increased 2.0 percent in July, hitting the U.S. central bank’s 2 percent target for the third time this year.
An escalating trade war between the United States and China is expected to keep inflation high. President Donald Trump last week threatened duties on another $267 billion worth of Chinese goods on top of a $200 billion tariff list that is awaiting his decision. Washington has already slapped duties on $50 billion worth of Chinese imports, provoking retaliation from Beijing.
The Fed is expected to raise interest rates at its Sept. 25-26 policy meeting. It has raised rates twice this year.
Minutes of the central bank’s July 31Aug. 1 meeting published last month showed “several participants commented that increases in the prices of particular goods, such as those induced by the tariff increases, would likely be one source of short-term upward pressure on the inflation rate.”
Last month, gasoline prices rebounded 3.0 percent after dropping 0.6 percent in July. Food prices edged up 0.1 percent, matching July’s rise. Food consumed at home was unchanged.
Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent in August after advancing by the same margin in the prior month. The rent index shot up 0.4 percent.
Healthcare costs decreased 0.2 percent last month, matching July’s drop, as prices for doctor and hospital services fell. Apparel prices tumbled 1.6 percent, declining for a third straight month. Prices for new motor vehicles were unchanged last month and the cost of used cars and trucks increased for a third consecutive month.