Gas and housing prices are still rising, continuing to pinch household budgets.
In August, they pushed up the federal consumer price index by 0.6% for the month. Overall, prices have risen 3.7% this year, according to a report released Wednesday by the Bureau of Labor Statistics.
"These numbers are not at all that comforting," said Creighton University economics professor Ernie Goss. With crude oil prices skyrocketing over the last six months, "overall inflation is not coming down like we thought."
Health Partners receptionist Leanne Garcia said with prices at the pump creeping back up during the past few months, "it hurts to go to the gas station. I send my husband so I don't have to see the prices."
It costs her $60 each week to fill up her Chevrolet Captiva. And she's not seeing any relief elsewhere in her necessary spending, either.
"I think food prices are expensive, too, everywhere you go," she said. "What helps is the free lunches the kids now get. It helps."
The index for gasoline costs jumped 5.6% in August, making it the largest contributor to the month's inflation woes, followed by rising housing costs, which rose for the 40th consecutive month.
In comparison, the index for food prices rose just 0.2% last month, the same as July.
Absent food and energy costs, the consumer price index rose 0.3% in August, compared to 0.2% in July.
But even with the bump, the energy price index actually decreased 3.6% for the 12 months ending in August. The food index increased 4.3% over the last year.
The overall cooling of the rate of growth has economists hoping the Federal Reserve will keep interest rates at the current level.
Lixin Qin is not noticing any relief on prices. She fills up her Honda twice weekly dashing from her home in Eden Prairie to her adult day-care business in Edina and a job in St. Paul.
"Everything is expensive. It's hard for small businesses," she said.
She's paying more in wages for 20 day-care workers than she did four years ago. At the same time, with higher food prices, it is more costly to feed 50 senior citizen clients each day.
Qin and her husband get some relief by buying vegetables at farmers markets. But beyond that, she said there's not much they can do. Any menu changes make patients complain, so she sticks to the menu they like and absorbs the costs, she said.
Excluding grocery and gas bills, last month's price hikes were particularly notable in rent, homeowner expenses, motor vehicle insurance, medical care and personal care.
However, August also delivered some price declines: notably for lodging, used cars and trucks, and recreation costs.
Economists noted that a deeper dive into the numbers over a longer period of time shows that sectors of the economy are changing.
Across the board, the index for all consumer prices rose 3.7% for the 12 months ending in August, which is larger than the 3.2% jump seen for the 12 months ending in July. (Federal Reserve economists generally hope for an inflation rate of just 2%.)
When food and energy were removed from the equation, the 12-month price index rose 4.3%.
Inflation woes are showing up in other places.
"The fear is that this [index report] gets embedded in wage demands" and used by worker groups — including the strike-threatening United Auto Workers — to demand higher wages, Goss said.
But the impact of Wednesday's report is greater than the auto industry.
Creighton just released economic survey results after polling manufacturers from Minnesota, Iowa, the Dakotas and five other central states. Only 27% of the factory supply managers said they expect positive growth in the second half of 2023.
"The wholesale inflation gauge for the month rose to 63.7 in August from 52.2 in July," said Goss.
That raises fears that there will still be a recession, as 45% of the supply managers surveyed by Creighton believe.
Wednesday's price index report may not cause the Federal Reserve to increase interest rates at its Sept. 19 meeting, but it could cause the body to look at the issue again in November.
"There I expect a rate hike of 25 basis points," Goss said.
