Inflation continued to scale back in August, according to the Consumer Price Index released yesterday by the U.S. Bureau of Labor Statistics. The consumer price index rose 2.5% for the 12 months ending in August—down from the 2.9% ending in July. It’s down from the 9.1% peak recorded in 2022 and the lowest reading since February 2021.
While the trend is sloping downward, there are still some concerns highlighted within the report. According to the New York Times, the monthly core measure, which shows how much prices picked up in between months while excluding food and fuel prices, increased 0.3% between July and August—slightly more than economists expected.
“The details made that move important: It came as a measure of housing prices proved surprisingly stubborn. Shelter costs make up a big chunk of overall inflation, so if they are not cooling as expected, they could prevent the pace of price increases from returning fully to the Fed’s goal,” the Times wrote.
“Overall, inflation appears to have been successfully tamed but, with housing inflation still refusing to moderate as quickly as hoped, it hasn’t been completely vanquished,” Paul Ashworth, chief North America economist at Capital Economics, wrote in a note Wednesday morning, CNBC reported.
Despite lingering concern about housing prices, “Overall inflationary pressures are ‘dissipating,’” Sarah House, senior economist at Wells Fargo Economics, told CNBC.
“But prices for staples such as groceries and gasoline have normalized and the inflationary trend appears firmly to the downside,” CNBC reported.
And according to the New York Times, the Federal Reserve is likely to lower interest rates for the first time since early 2020 at its meeting next week. “I still think they are confident enough to proceed with rate cuts, but it suggests: Don’t go super fast here,” said Laura Rosner-Warburton, senior economist and founding partner at MacroPolicy Perspectives. “We’re not completely out of the woods.”
The Federal Reserve is looking for a “soft landing,” and to avoid a recession.
According to the National Retail Federation, a soft landing is likely. “With the economy slowing but still growing and inflation down as the Federal Reserve prepares to lower interest rates, the United States appears to have dodged a recession,” National Retail Federation Chief Economist Jack Kleinhenz said.
“The U.S. economy is clearly not in a recession nor is it likely to head into a recession in the home stretch of 2024,” Kleinhenz said. “Instead, it appears that the economy is on the cusp of nailing a long-awaited soft landing with a simultaneous cooling of growth and inflation.”
Kleinhenz’s comments came in the September issue of NRF’s Monthly Economic Review, which said annualized gross domestic product growth for the second quarter has been revised upward to 3% from the original report of 2.8%. Consumer spending, the largest component of GDP, was revised up to 2.9% growth for the quarter from 2.3%. Spending has moderated this year after accelerating in the second half of 2023 but “the American consumer has been resilient.”