The pace of inflation likely moderated again in August — further relief for beleaguered consumers still smarting from pandemic-era price shocks.
On Wednesday, the Bureau of Labor Statistics is set to report the latest change in the consumer price index covering August. Estimates are for an annual increase of 2.6%, down from 2.9% in July.
Though price growth has largely returned to the Federal Reserve’s official 2% target, the sting of rapid price increases over the past four years lingers for many consumers.
Since the onset of the Covid-19 pandemic in the spring of 2020, the average cost of a gallon of milk has climbed about $1, while a dozen eggs are up $1.50. In total, the overall consumer price index has climbed about 21%.
There’s been even less relief away from the kitchen table: According to data from the restaurant software management group Toast, diners are paying 4% to 5% more for everything from burgers to burritos in the second quarter of 2024 compared with the same quarter last year.
The price jumps have dogged President Joe Biden throughout his administration and forced Vice President Kamala Harris, now the Democratic presidential nominee, to come up with a plan to ban what she has called “price gouging” by supermarket retailers.
While everyday items are more expensive, it is housing costs that continue to put Americans most at risk of seeing their living standards fall. The Bureau of Labor Statistics’ measure of housing inflation has steadied at about a 5% annually, compared with food-cost growth, which has risen only about 1%.
Since the start of the pandemic, rents are up 25% nationwide on average. According to Zillow, the median monthly rent in the U.S. is now about $2,100 — and approximately $3,600 in New York and $2,800 in Los Angeles.
According to Princeton University’s Eviction Lab, which compiles notices from select regions and metros, evictions are exploding in places like Minneapolis-St. Paul, Las Vegas and Phoenix compared with pre-Covid averages — though they are down elsewhere.
And as the jobs market shows increasing signs of slowing, so too is homeowner financial health alongside that of renters.
“Mortgage delinquencies increased across all product types compared to this time last year,” Marina Walsh, vice president of industry analysis at the Mortgage Bankers Association, said last month.
“While delinquencies are still low by historical standards, the recent increase corresponds with a rising unemployment rate, which has historically been closely correlated with mortgage performance,” Walsh said.
The latest inflation report is likely to cement a 0.25% cut in the Federal Reserve’s key interest rate, currently at about 5.3%, later this month.
But experts say it will take some time for consumers to feel the impact of the lower interest rate — and the relatively small size of the cut means borrowing costs will still be somewhat elevated.
Some economists remain sanguine about the state of the U.S. economy. In a note last week, Torsten Slok, partner and chief economist at Apollo Global Management financial group, cited wage growth, consumer spending and GDP as all indicative of a “soft landing” for the economy in which unemployment and inflation are subdued.
“The bottom line is that the US economy is not in a recession, and there are no signs of a recession on the horizon,” Slok wrote.
But Sophia Kearney-Lederman, senior economist at FHN Financial group, told NBC News that many investors are now forecasting a “hard landing” based on jobs data that has been persistently weak.
While the Fed is now widely expected to cut interest rates, a cut of just 0.25% may not be enough to stave off that scenario.
Instead, investors will be looking to Fed Chair Jerome Powell’s remarks announcing the central bank’s latest move to learn whether the Fed believes the economy is weaker than feared — and that more and steeper cuts could be necessary.
“I do think what will be more important than the first cut is the pace they go at,” Kearney-Lederman said.
