During most of the year, many economists claimed that inflation was essentially a problem in the food and fuel sectors. Once supply chains normalized and fuel prices decreased, according to their thinking, this would relieve pressure across the economy and inflation would return to being under control.
However, the main inflation indicator, the Consumer Price Index (CPI), in August seriously tested this narrative. Besides the decrease in fuel prices, the index pointed to increasingly widespread increases across various sectors of the economy. This means that inflation may be more persistent than previously thought.
The CPI excluding food and energy prices – the so-called core inflation – rose 0.6% for the month, double the Dow Jones estimate, raising the year-over-year cost of living by 6.3%. Including food and energy, the index rose 0.1% monthly and a robust 8.3% over 12 months.
Instead of fuel, it was food, housing, and medical services that drove costs up in August.
The cost of food increased by 11.4% over the past year, the largest annual increase since May 1979, according to data released by the Bureau of Labor Statistics.
As consumers walk through the supermarket aisles, they will notice that most food items are much more expensive than a year ago. Egg prices rose 39.8%, while flour became 23.3% more expensive. Milk increased by 17% and the price of bread jumped 16.2%.
Meat and poultry also became more expensive. Chicken prices rose 16.6%, while beef prices increased by 6.7% and pork by 6.8%. Fruits and vegetables together rose by 9.4%.
Housing costs, which include rents and various other housing-related expenses, account for nearly one-third of the CPI weight and rose 0.7% for the month.
For healthcare services, the monthly increase of 0.8% is the largest monthly gain since October 2019.