Consumer price growth heated up in August, the Bureau of Labor Statistics reported Thursday. It’s the latest indication that the U.S.economy continues to contend with an inflationary environment even as job growth cools.
The broadest measure of price growth increased 0.4% last month after rising 0.2 percent in July and coming in ahead of estimates of 0.3%. On a 12-month basis, the index climbed by 2.9% compared with 2.7% in July. It’s the highest reading since January.
On Wednesday, the BLS reported wholesale price growth for August that came in softer than estimates, as companies ate higher costs. That led some analysts to conclude that the inflationary environment in the economy might not be as worrisome as feared.
That cemented bets for a rate cut by the Federal Reserve when it meets next week. Economists’ attention, otherwise, has turned to the weakening job market. Weekly jobless claims came in at 263,000, higher than expectations.
President Donald Trump has insisted that there is “no inflation” and that the Fed should have cut long ago. In a note to clients ahead of Thursday’s release, analysts with Citi financial group said weak consumer demand and “near-zero job growth” has created a “disinflationary” economic backdrop, meaning the rate of inflation is cooling.
Bond investors are also indicating they see a cooling economy, having sent the yield on the 10-year Treasury note to lows not seen in April. The Treasury yield represents the return demanded by investors for lending to the government, and when expectations for inflation are subdued and demand for bonds increases, the yield falls. Mortgage rates have declined, as well.
Stocks, however, keep climbing higher ahead of expectations for a rate cut. Companies’ earnings tend to increase if they do not have to pay as much to borrow money, assuming demand holds steady. Futures were higher as of 8:40 a.m. ET Thursday.
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