US Consumer Prices Rise 0.4 Percent in August as Gasoline Leads; Annual Rate Holds at 3.4 Percent
United States consumer prices rose 0.4 percent in August on a seasonally adjusted basis, a step up from 0.1 percent in July, as a jump in gasoline accounted for more than a third of the increase, the Bureau of Labor Statistics reported on Friday. Over the 12 months to August the all items index rose 3.4 percent, unchanged from the annual rate in July. Core prices, which exclude food and energy, rose 0.3 percent on the month after 0.2 percent in July, while the core annual rate eased to 2.4 percent from 2.5 percent. The print was energy led but not energy only, on our reading: gasoline drove the headline, yet monthly core and shelter both firmed even as the 12 month core trend continued to ease.
Energy drove the monthly pickup
The gasoline index rose 3.9 percent in August and accounted for more than a third of the monthly all items increase, while the broader energy index rose 2.1 percent over the month, having fallen 1.5 percent in July, and stood 16.3 percent higher over the year, per the Bureau of Labor Statistics. The rise was concentrated in energy commodities: gasoline was 27.4 percent higher over the year and fuel oil jumped 10.1 percent on the month, while energy services went the other way, electricity down 0.2 percent and utility gas down 1.1 percent. The reading lines up with the surge in crude that we covered in our commodities wrap of 10 September, when Brent traded above 100 dollars a barrel, and on our reading it points to the energy move feeding through to the consumer price data. Shelter, the largest single component, rose 0.3 percent after 0.1 percent in July and was 3.0 percent higher over the year, with owners’ equivalent rent and rent each up 0.2 percent on the month. The food index rose 0.1 percent on the month and 2.7 percent over the year, with food away from home up 0.3 percent and 3.4 percent higher over the year.
Core inflation firmed on the month but cooled over the year
Underlying inflation sent a mixed signal. The 0.3 percent monthly core reading was firmer than July’s 0.2 percent, but the annual core rate eased to 2.4 percent from 2.5 percent in July, a further easing from the prior month. Among the categories that rose were lodging away from home, up 2.4 percent after falling 2.8 percent the previous month, along with airline fares, communication, education and used cars and trucks, while medical care and motor vehicle insurance were among the major indexes that fell, per the Bureau of Labor Statistics. That the pickup reached shelter and the monthly core, not energy alone, is why the report reads on our reading as energy led but not energy only.
| Category | August, monthly | 12 months |
|---|---|---|
| All items | +0.4% | +3.4% |
| Core, less food and energy | +0.3% | +2.4% |
| Energy | +2.1% | +16.3% |
| Gasoline | +3.9% | +27.4% |
| Shelter | +0.3% | +3.0% |
| Food | +0.1% | +2.7% |
Monthly changes are seasonally adjusted; 12 month changes are not seasonally adjusted, per the Bureau of Labor Statistics for August 2026.
Why it matters: The report is mixed rather than dovish, on our reading. The headline accelerated to 0.4 percent on energy and the monthly core firmed to 0.3 percent, yet the annual core rate slipped to 2.4 percent, so core inflation, which the Federal Reserve watches closely as a guide to its preferred gauge, the personal consumption expenditures price index, still eased over the year even as the top line and the monthly core firmed. The data lands days before the Federal Open Market Committee’s decision on 16 September, and the setting is hawkish, on our reading: the Federal Reserve held its target range at 3.50 to 3.75 percent in a 9 to 3 vote in July, with 3 regional presidents dissenting in favour of a rate rise and the July minutes showing officials saw a case to hike if inflation did not cool, per CNBC. With the United States 10 year Treasury yield near 4.95 percent, its highest since October 2023, the print gives the bond market competing signals rather than a clean argument for a cut, which is not the live question, or for an immediate hike.
Outlook: The near term turns on whether the energy pass through persists, on our reading. Crude has been volatile, trading above 108 dollars a barrel during Friday’s Asian session before falling back, as set out in our Asia wrap of 11 September, so the gasoline contribution that drove this month’s headline could fade or build depending on where the barrel settles, and because August prices were collected before the latest crude swings, more of that effect would show in later readings. For the underlying trend, the easing in the annual core rate to 2.4 percent is the number that argues for patience, while the firmer monthly core, the rebound in shelter and the energy driven headline are the caution against it, with 3 officials already leaning towards a hike. The Federal Reserve’s decision next week will show which the policymakers weigh more heavily.
Sources: Bureau of Labor Statistics, Federal Reserve, CNBC, The Edge.
