The prices U.S. consumers pay for goods and services continued to climb in August, with the Bureau of Labor Statistics finding that inflation ticked up even before renewed conflict in the Middle East sent oil prices soaring again.
The consumer price index rose by 0.4% for the month — an annual rate of 3.4% — with significant jumps in the technology, airfare and communication sectors leading the way.
Core inflation, a closely watched indicator that excludes food and energy prices, jumped more than economists had expected, which many immediately saw as opening the door for a Federal Reserve rate hike next week.
“America still has an inflation problem,” Heather Long, chief economist at Navy Federal Credit Union, wrote on X.
Even before energy prices began surging again at end of the month, “the index for gasoline rose 3.9 percent in August, accounting for over one third of the monthly all items increase,” BLS said.
This week, President Donald Trump began acknowledging that it may take until November to get gas prices lower again. “Right after the election, oil prices are going to be tumbling downward,” he told reporters Wednesday.
Meanwhile, BLS said shelter costs ticked up 0.3%, and food costs rose 0.1%. The “food at home” category was flat, while the “food away from home” index, which tracks takeout and restaurant dining rose 0.3%. Over the last year, the food index overall has risen 2.7%.
That data may already be stale, however. On Friday, U.S. crude oil traded around $100 per barrel and international Brent crude oil traded at about $105 per barrel. Those levels are about 20% higher than the middle of August.
Also Friday, the nationwide average of diesel fuel hit $6 per gallon for the first time.
Several other areas of pain for consumers showed up in the report. Airline fares rose 2.7% in August, while the index that measures the price of communications rose 2.3%. BLS also noted that the prices of used cars, trucks and education rose.
On the other hand, the price of apparel was broadly flat, and the indexes that measure the price of vehicle insurance and medical care declined.
“The upside surprise to core CPI in August means the Fed looks set to hike next week,” said Stephen Brown, Capital Economics’ chief North America economist.
In the minutes following the report, market odds for a Fed rate hike rose from under 70% to nearly 90%. Odds for a follow-on hike in October rose to almost 60%. The Fed’s next policy meeting takes place Tuesday and Wednesday.
A rate hike could add pressure on consumers already dealing with high rates and prices. On Thursday, the average 30-year fixed rate mortgage rose above 7%, thanks to a surge in the 10-year Treasury yield. The national average price of gas also remains elevated by more than 40% since the United States and Israel launched the Iran war Feb. 28.
Compounding the challenge for consumers was separate BLS data Friday showing that real average hourly earnings for U.S. workers decreased by 0.1% from July to August. Average hourly earnings declined by 0.3% from a year ago, the agency added.
The data had little impact on bond yields, which had already surged this week. However, stocks rose. The S&P 500 jumped almost 1% and the Nasdaq Composite spiked higher by 1.3%.
Inflation hasn’t been only showing up in categories linked to spiking energy prices. In June, Apple hiked prices on a range of its products. “The rapid expansion of AI data centers has created an extraordinary surge in demand for memory and storage,” the company said at the time.
Those Apple price hikes also came along similar price hikes from Xbox, Nintendo, Amazon and computer manufacturers.
“We have never seen a component price increase this much, this quickly,” Apple added.
In Friday’s report, data showed that the category that measures the price of computer software, accessories and related items has risen 25.4% over the last year. That is its largest yearly increase on record.
On Wednesday, Apple hiked prices on most of its iPhone offerings as well.
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