US Inflation Slows Growth, But Remains Higher Than Forecasts

US Department of Labor reportedthat in August the consumer price index (CPI) rose by 0.1%, while in July the CPI dynamics was zero. Compared to August last year, prices increased by 8.3%, which is slightly lower than the July dynamics (8.5%) and the record June (9.1%). In August, compared to July, the prices of gasoline (by 10.6%) and diesel fuel (by 5.9%) fell the most in the USA. This led to the fact that energy raw materials as a whole fell in price by 10.1% compared to July.

However, on an annualized basis, compared to August last year, the growth in fuel prices still remains high: diesel – by 68%, gasoline – by 25.6%, energy raw materials in general – by 27.1%. The most significant growth on a monthly basis in August was recorded for gas heating – 3.5%. The increase in food prices in August compared to July amounted to 0.8%, year-on-year – 11.4%. For clothing on a monthly basis – by 0.2%, on an annualized basis – by 5.1%.

The market reaction to the August inflation data turned out to be rather painful – the Dow Jones index lost 880 points, or 2.7%, in the first hours of trading, the S&P 500 index – 3.14%, the NASDAQ index – 4.1%. This reaction is explained by the fact that experts were waiting for a more significant slowdown in inflation on a monthly basis – a reduction of 0.1%, while an increase of 0.1% was shown. On an annualized basis, experts also expected a smaller increase in prices – by 8%, and not fixed – 8.3%.

“Inflationary dynamics are improving and moving in the right direction, but still causing a lot of trouble for both consumers and businesses,” he is quoted as saying. The Wall Street Journal Senior Economist at Oxford Economics Kathy Bostianich. Analysts believe that continued inflationary pressure will force the US Federal Reserve to go back to promotion discount rate at the next meeting on September 20–21.

Evgeniy Khvostik