Consumer prices rose 0.3 percent in August and 5.3 percent over the past 12 months, according to data released Tuesday by the Labor Department
Monthly growth in the consumer price index (CPI), a closely watched gauge of inflation, fell for the second consecutive month, dropping from a July increase of 0.5 percent. Economists expected the CPI to grow by 0.4 percent last month.
Annual growth in the CPI — one of several ways to measure yearly inflation — also fell from a 5.4 percent rate in July, the highest rate since August 2008. Excluding food and energy prices, which are more volatile, the CPI rose 4 percent over the past 12 months and just 0.1 percent in August.
While inflation remains close to decade-plus highs, the continued slowdown in price growth may help President Biden and Democrats soothe concerns about the rising cost of living as they attempt to pass a sprawling economic agenda. Republicans have sought to blame Biden and congressional Democrats for the recent run-up in price growth with slightly more than a year until the midterm elections.
The decline may also relieve some pressure on the Federal Reserve to begin pulling back on bond purchases meant to keep borrowing costs low, especially as the delta variant continues to roil the U.S. economy.
“The August CPI report showed further moderation in the monthly gain in consumer inflation, especially at the core level,” wrote Kathy Bostjancic of Oxford Economics.
“Headline CPI advanced by a solid 0.3%, though this is much softer than the outsized increases recorded in the prior five months,” she added.
Economists expected inflation to cool slightly after a summer rush of travel and leisure spending drove price growth to remarkably high levels following steep declines in 2020.
Prices for airline fares, used cars and trucks, and motor vehicle insurance all fell in August after skyrocketing through most of the spring and summer. The CPI for used autos, which drove much of the summer’s increase in inflation, fell 1.5 percent in August but is still 31.9 percent higher than the same point in 2020.
Monthly inflation for groceries, restaurant and takeout meals, new vehicles, and shelter also fell in August. The rate of price growth for gasoline rose 0.4 percent in August, but the cost of fuel oil fell 2.1 percent last month as well.
The slowdown in inflation comes at a critical time for Biden and congressional Democrats as they race to write and pass a multitrillion-dollar infrastructure and social services bill, strike a deal with Republicans to fund the federal government and raise the country’s borrowing limit.
Sen. Joe Manchin (D-W.Va.) specifically cited high inflation as a reason to “pause” the Democratic spending push in remarks and interviews last week, and other moderate Democrats privately share some of his concerns.
Both Biden and Federal Reserve Chairman Jerome Powell have expressed confidence for months that inflation will cool off as the global economy scales back up to meet rising demand and clear backlogs. But it remains unclear how rising cases of COVID-19 driven by the delta variant will shape inflation and the broader economy.
Consumer activity and confidence fell off in August amid the delta surge, and the U.S. added just 235,000 jobs that month with no net increase in leisure and hospitality employment. Delays and closures at the start of the school year have also prevented untold working parents from returning to work or increasing their hours.
While a decline in demand for in-person, close-contact services could cause inflation to fall in several sectors, a shift in spending toward goods coupled with further pandemic-related supply chain snags could boost price growth elsewhere.
Updated at 9:14 a.m.