In case you missed it, last week’s inflation numbers were … not great. The consumer price index for August came in well above expectations, driven in large part by higher food prices and rents (a big part of “core services” below) that more than offset a welcome decline in energy prices.
From the experts I read (including in the first link above), the CPI print wasn’t all bad and might even have some good news buried therein. But that’s certainly not the case for food and housing, both of which will—for various reasons (e.g., Ukraine, U.S. droughts, housing supply and demand issues, and some wonky calculation issues)—probably continue to remain elevated in forthcoming CPI reports until at least next year.
These data aren’t merely a headache for the inflation-obsessed Federal Reserve (shelter inflation is about 40 percent of total CPI), but also—of course—a real problem for everyday Americans. We all need food and housing, and higher spending on these necessities can diminish spending elsewhere. And, while we may be accustomed to ever-higher housing prices (sigh), the regular shock of food prices doing not just the same but way worse—something Americans haven’t experienced in ages—can inflict a disproportionately large psychological toll on consumers, causing us to pull back even more. None of this is good for the U.S. economy.