U.S. inflation held at 3.4% in August, while monthly prices rose 0.4%

U.S. inflation refused to budge from 3.4% in August, leaving another Federal Reserve rate increase very much in play. Consumer prices climbed 0.4% from July, well above the prior month’s 0.1% increase, according to Bureau of Labor Statistics figures.

CPI-U was already rising drastically during the early part of the year. In February, the increase stood at 0.3%, 0.9% in March, 0.6% in April, and 0.5% in May before falling by 0.4% in June. In July, there was a minor rise of 0.1% followed by another jump in August. Yearly inflation remained unchanged from July at 3.4%.

Meanwhile, traders pushed the odds of another Fed hike to roughly 70% in morning trading, based on CME Group (NASDAQ: CME) FedWatch pricing. They also priced the likelihood of another increase in December at close to 60%.

Wholesale prices gave traders another reason to stay cautious. Producer prices rose 0.4% in August, exactly as expected, while July’s figure was revised higher to a 0.1% increase. That brought annual PPI inflation to 5.4%, a little above forecasts. Meanwhile, U.S. crude oil climbed past $100 a barrel.

Energy and food costs keep adding pressure to inflation across household spending

The prices for energy items increased by 2.1%, partially offsetting the previous month’s decrease of 1.5%. Prices for gasoline have increased 3.9% after seasonal adjustment and constituted one-third of the total CPI change.

Gasoline prices increased by 2.5% during August without seasonal adjustment, whereas the previous monthly changes were 0.8%, 21.2%, 5.4%, 7.0%, -9.7% and -2.9%.

Gasoline prices have now increased by 27.4% year-over-year basis. The energy index has increased 16.3%. Energy commodities prices have increased 4.2% in August and increased by 28% over the last 12 months. Prior to August, the changes for this category were 1.1%, 21.3%, 5.6%, 6.7%, -9.5% and -2.9%.

Fuel oil prices surged 10.1% in August and now sit 52% above their year-ago level. From February through July, monthly changes came in at 11.1%, 30.7%, 5.8%, 3.8%, minus 9.2% and minus 1.7%.

However, energy services fell by 0.4% in August and were still above last year by 4%. The previous readings for monthly changes were 0.2%, 0.4%, 1.6%, 0.4%, -0.7%, and 0.3%.

Food costs increased by 0.1% in August and were 2.7% above those of August last year. The previous monthly changes were 0.4% in February, 0 in March, 0.5% in April, 0.2% in May and June, and 0.1% in July.

Housing, travel and service costs continue pushing core inflation higher

Core inflation, which leaves out food and energy, increased 0.3% in August after a 0.2% rise in July. The yearly rate cooled slightly to 2.4% from 2.5%. Before August, monthly core readings came in at 0.2% in February, 0.2% in March, 0.4% in April, 0.2% in May, zero in June and 0.2% in July.

Housing costs rose 0.3% after gaining just 0.1% one month earlier. They are now 3% above where they stood a year ago. Housing had posted monthly increases of 0.2%, 0.3%, 0.6%, 0.3%, 0.1% and 0.1% from February through July. Rent increased 0.2% in August, and owners’ equivalent rent rose by the same amount.

Hotels and other short-term lodging became 2.4% more expensive after prices fell 2.8% in July. Communication costs climbed 2.3%, compared with 0.6% a month earlier. Airfares increased 2.7%, while education prices rose 0.8%.

Car prices also went up. Used cars and trucks became 0.4% more expensive, matching July’s increase, though prices remained 2.3% below their year-ago level. Earlier monthly readings were minus 0.4% in February, minus 0.4% in March, zero in April, 0.1% in May and minus 0.2% in June.

Before seasonal adjustment, the main CPI-U index stood at 334.980, with the 1982-84 period set at 100. It increased 0.3% during August before seasonal factors were included.

CPI-W, which tracks prices paid by urban wage earners and clerical workers, reached 328.481. It was 3.5% above its year-ago level and rose 0.4% during August before seasonal adjustment.

The chained C-CPI-U increased 3.3% from a year earlier and rose 0.3% during August on an unadjusted basis. Numbers covering the most recent 10 to 12 months can still be revised later.

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