Inflation at the consumer level in August grew at a slower rate than in July - restrained by cooling housing and energy prices - likely alleviating some of the pressure the Federal Reserve will feel to further increase interest rates.
The Labor Department reported Friday the Consumer Price Index rose by 0.2 percent in August, versus the 0.4 percent increase in July. The government noted that the level in August was 3.8 percent higher than in the same month a year ago.
Stripping out volatile food and energy prices, the so-called “core” inflation rate rose by 2.8 percent over the past 12 months, higher than what the Fed is generally considered comfortable with.
Energy prices, which surged 2.9 percent in July, expanded at just a 0.3 percent rate, with the index for petroleum-based energy increasing 0.4 percent and the index for energy services rising 0.2 percent. Oil prices have pulled back sharply of late, with the price of a barrel of oil down more than 20 percent since hitting more than $77 earlier in the summer.
Housing prices rose by 0.2 percent in August, the Labor Department said, down from July’s 0.3 percent gain, and the transportation index also increased by 0.2 percent. Gas prices rose 0.2 percent, on the heels of July’s 5.3 percent jump.
Apparel prices, down 1.2 percent in July, rose 0.9 percent in August, and food and beverage prices roe by 0.3 percent, versus the 0.2 percent increase in July.
The Fed will meet next Wednesday to determine its next move on monetary policy, having left rates unchanged in August. Central bankers are widely expected to do the same next week.
Meanwhile, the Federal Reserve said industrial production eased 0.1 percent in August after July's 0.4 percent increase. Manufacturing output was unchanged, and the output of utilities dropped as temperatures returned to more normal levels. Capacity utilization in manufacturing slipped to 82 percent, though it remains better than the level seen a year ago. “The latest data on the industrial economy clearly show a moderation in the goods-producing sector,” said Thomas J. Duesterberg, President and Chief Executive Officer of the Manufacturers Alliance/MAPI. “While most major industries show production well above year-ago levels, the rate of increase has slowed in recent months in sectors like autos, construction materials, machinery, and mining. Capacity utilization also slipped. These numbers are fully consistent with a decline in inflationary pressures in the months ahead.”