In August, U.S. consumer prices rose more than anticipated, but core inflation remained steady, indicating limited effects from tariffs.
The Labor Ministry reported a 0.4% increase in the consumer price index compared to the previous month. Economists had expected a 0.3% rise, following a 0.2% increase in July.
Year-over-year, the consumer price index climbed 2.9%, aligning with forecasts.
Shelter costs led inflation with a 0.4% rise, while food and energy prices also contributed to the increase. Import-sensitive items like apparel and cars only saw minimal price hikes, and some traded goods even experienced price drops.
Core prices, which exclude food and energy, rose by 0.3%, consistent with expectations. Core CPI had also increased by 0.3% in July, and year-over-year, it was up 3.1%, matching predictions.
Prices for core services and products also saw a 0.3% increase.
Food prices increased by 0.5% in August, with grocery prices up 0.6% and restaurant prices up 0.3%. Energy prices rose 0.7%, with gasoline up 1.9%. Meanwhile, electricity prices saw a modest 0.2% rise, whereas natural gas prices fell by 1.6%.
New vehicle prices rose by 0.3% and used car prices increased by 1%.
Clothing prices went up by 0.5%, although footwear prices dropped 0.4%. While household furniture prices rose 0.1% after a sharp increase of 0.7% in July, major appliances saw a decline of 1.1% as laundry equipment prices dropped by 2.9%. Toy prices fell 0.8%, following previous increases.
Medical services prices dipped by 0.1%, although doctor care increased by 0.3% and dental care rose by 0.7%, while hospital service prices remained unchanged.
After a 2.6% drop in July, software prices plummeted by 5.5%. Computer prices dropped by 0.6% after a 1.2% decline in July, and smartphone prices fell 0.2% after remaining stable last month.
According to the Bureau of Labor Statistics, the producer price index decreased by 0.1% in August, contrary to expectations of a 0.3% increase. Excluding food and energy, core PPI increased by 0.3%, with service prices declining even as commodity prices rose.
A measure of producer prices based on retail and wholesale transactions—known as trade services—dipped significantly, suggesting companies are absorbing the added costs from tariffs rather than passing them onto consumers.
The consumer price index reflects what consumers pay and includes consumption taxes and imports but excludes exports. Conversely, the producer price index considers exports but excludes import costs and sales tax, measuring prices applicable to governments, businesses, and nonprofits, while the consumer price index only includes household expenses.
It’s widely anticipated that the Federal Reserve will lower interest rates when the Federal Open Market Committee convenes next week. This year, despite a softening job market and low inflation, the Fed has managed to keep rates stable, drawing criticism from economists who feel that both the Fed and President Trump may not be responding appropriately to economic developments. Recently, a preliminary estimate indicated that 911,000 jobs were added in the 12 months through March 2025, a revision from earlier figures.
Additionally, the Labor Bureau reported a rise in unemployment, increasing from 236,000 last week to 263,000, whereas economists had forecasted a drop to 234,000.
