Used cars drive United States consumer prices higher in August

People shop at Macy's Department store in New York

USA consumer prices rose in August due to higher costs for a range of items, a sign of firmer inflation as demand for goods continues to rebound from a coronavirus pandemic-induced downturn earlier this year.

The Labor Department said on Friday its consumer price index rose 0.4% last month. The CPI climbed 0.4% from the prior month following a 0.6% advance. On a non-seasonally adjusted basis, the overall consumer-price index rose 1.3% in August from a year earlier and core prices increased 1.7% over the year. The CPI advanced 0.6% in June and July after declining in the prior three months as business closures to slow the spread of the coronavirus depressed demand.

Used cars and trucks drove the growth with a 5.4 per cent gain, while gasoline rose 2.0 per cent, though that was less than its 5.6 per cent rise in July. On an annual basis, core inflation measured 1.7% following 1.6% in July.

Policymakers have expressed a range of ideas about how this might work in practice, but agree the aim is to let prices rise fast enough that household and businesses take their inflation target seriously. But as the economy has reopened, demand has gradually picked up once more. The dollar .DXY was slightly lower against a basket of currencies.

In addition to used autos, the costs of motor vehicle insurance, apparel and airfares also rose from a month earlier. Education, which showed the first drop in records back to 1993, was among the categories that declined. College tuition and fees fell 0.7 per cent, the most since 1978, as many schools transitioned to online learning.

But don't expect firming inflation pressures to impact monetary policy.

However, the prices of housing, water, electricity, gas, and other fuels fell by 0.42 per cent; communication by 0.02 per cent; miscellaneous goods and services by 1 per cent; and restaurants and hotels by 0.32 per cent in August 2020 compared to the same month of 2019. New vehicle prices were unchanged in August but analysts predict prices are likely to rise in coming months, reflecting supply shortages. A 5.4% jump in prices of used cars and trucks, the largest gain since March 1969, accounted for more than 40% of the rise in the so-called core CPI last month.

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