Core Inflation Slows in August
Core inflation saw a slowdown in August, according to a report released by the Federal Reserve, which indicates that tariffs introduced by President Trump haven’t significantly impacted household prices in the U.S.
The personal consumption price index increased by 0.3% compared to the previous month, rising from a 0.2% bump in July. Over the year ending in August, this index rose by 2.7%, up from a 2.6% increase in July.
Core prices, which exclude the often fluctuating categories of food and energy, went up by 0.2%, a decline from the previous month’s 0.3% rise. Year-over-year, the core index has seen a 2.9% increase, similar to the inflation figures registered in July.
The prices for durable goods, likely impacted by tariffs, dropped for the second month in a row by 0.1%. When adjusted for inflation, the actual spending on these goods fell by 0.9% following a 1.8% increase in July. This suggests consumers aren’t holding off on long-term purchases despite concerns about the labor market or tariffs.
Since the beginning of Trump’s presidency, durable goods prices have increased by 0.4%, reflecting an annual inflation rate of about 0.6%. During the same time frame, the overall inflation index rose at an annual rate of 2.6%, remaining steady year over year.
Prices for non-durable goods increased by 0.2%, recovering from a 0.1% drop the prior month. Actual spending on durable goods showed a rise of 0.5%.
Overall, consumer spending went up by 0.6%, as reported by the Commerce Department. When inflation is factored in, expenses still rose by 0.3%.
Rising wages and income contributed to this increase in spending, with personal income climbing by 0.4% (or 0.1% when adjusted for inflation). Wages themselves went up by 0.3%, reflecting ongoing inflationary pressures. After adjusting for inflation and taxes, disposable income also rose by 0.1%, marking the second consecutive month of growth.
The services sector emerged once more as a contributor to inflation in August, with prices increasing by 0.3%, matching the rise seen in July. Spending on services climbed by 0.5%, leading to a 0.2% increase when adjusted for inflation. Food prices experienced a notable spike, increasing by 0.5% after a decline in July.
Prices related to energy goods and services jumped by 0.8%.
A specific measure known as market-based PCE eliminates prices estimated using economic models, capturing only those that are directly observable, and rose by 0.2%. Excluding food and energy, this core market-based PCE also had a 0.2% increase.
