COLORADO SPRINGS, Colorado — Americans paid an average of 8.3 percent more for goods and services in August than they did a year ago according to the latest Consumer Price Index (CPI) report released Tuesday by the Bureau of Labor Statistics.
That monthly measurement of the economy was down slightly from the 8.5 percent increase reported in July, and a four-decade high of 9.1 percent in June.
The government cites increases in the shelter, food, and medical care as contributing to a broad-based monthly increase in all items tracked for the report.
Tatiana Bailey, Ph.D., the Executive Director of the UCCS Economic Forum, sees the increases as a broader trend in the economy.
"Forty-eight percent of the goods and services that are used to calculate the CPI, the inflation index, increased over the month," Bailey said. "So, right there that tells you that you don't have one or two goods that are the problem, or even 3 or 4. You've got a huge basket of goods, in fact most."
Bailey suspects that had gas prices not dropped so quickly, the August CPI would be even higher.
Another data point in the CPI that economists are closely tracking is known as "core prices," sometimes called "core inflation." It measures all the same goods and services as the CPI but without the volatile food and energy indices.
Core prices in August rose 0.6 percent over July's measurement and are up 6.3 percent over August of 2021. Bailey said that the Federal Reserve looks to the core prices index when making decisions about interest rate adjustments.
The Fed has raised short-term interest rates by 0.75 percent in each of its last two meetings. Many economists expect the Fed will adjust rates higher again when they meet on Tuesday, September 20.
The purpose of raising interest rates is to cool inflation by lowering demand. In theory, consumers and businesses may decide against a big purchase if the financing is too expensive.
Freddie Mac reported last week that the national average interest rate for a 30 year home loan was 5.9 percent, a 14 year high.
Consumer demand remains high despite price hikes on big ticket items like new cars. Yes, Dr. Bailey explained, people are still purchasing. However, those reports can mask economic trends.
"For instance, when you look at the retail sales numbers that come out every month, they have been consistently high," she said. "So, a lot of people saying are hey, it's all good, you know consumers out there purchasing; those retail numbers are in dollars, so they reflect inflation."
Bailey watches other reports like how often Americans use their credit cards to make purchases.
"It turns out they're using credit cards a lot more than they were a few months ago, and probably a lot of that reason is that they're dollar is just not going as far," she said.
Bailey also notes that inflation-adjusted wages have dropped by 3.4 percent, cutting into American's spending power.
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