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Inflation Declines in August, Yet Cost of Living Still Expected to Rise

Inflación Agosto

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Inflation increased by 0.3 % for the month of August, following a 0.5 % rise in the month of July. With the August price increase, cumulative U.S. inflation adjusts to 4.4%, and seasonally unadjusted inflation over the last twelve months totals 5.3%, according to data from the Bureau of Labor Statistics.

The price indexes for housing, services, vehicles and the cost of energy increased during the month of August; however, the largest increase was again experienced by the price of gasoline, which has already accumulated an increase of 42% in twelve months.

The cost of electricity has been rising for three consecutive months, mainly driven by the rising cost of gasoline. During the months of May and April, the price of gasoline decreased, after having suffered an increase of more than 15% at the beginning of the year caused by the closure of the Suez Canal, the hacking of the Colonial pipeline, and the withholding of oil reserves by the Organization of Petroleum Producing Countries.

The New York Federal Reserve has warned that American consumers will have to get used to higher prices in the future. (Image: EFE)

Inflation in the United States has accelerated due to several reasons, first the country has experienced a surge in demand, partly stimulated by cheap credit and government stimulus checks and partly by economic openness following the pandemic shutdowns.

Other factors that have affected price increases is the global shortage of semiconductors, crucial to the manufacture of appliances, automobiles, video game consoles and computers. The expansion of 5G Internet, as well as the launch of new consoles such as the PS5 and the Xbox X and S Series, have caused the demand for semiconductors to increase substantially, without supply being able to match demand in time.

The rising price of housing, for which demand has experienced a boom not seen since 2007, has also put pressure on rental costs, which are becoming increasingly privatized in some U.S. cities such as San Francisco and New York.

Prices for services such as air travel, entertainment and recreation are still recovering from the slump suffered during the COVID-19 pandemic. The emergence of the Delta variant may have slowed the rise in prices during August.

Rising inflation has ended up completely dissipating wage increases for low-skilled labor in the United States. (Image: EFE)

The price of food as well as certain retail products have been affected by rising transportation costs, and the lack of personnel for both truck drivers and warehouse workers to speed up the mobility of movements.

Some supermarket chains have begun to hoard non-perishable inventory to shield themselves from the rising inflation faced not only by consumers, but also by producers and retailers.

The shortage of workers has led to an increase in wages across the country, with some chains such as McDonald’s already offering as much as $18 an hour, however, inflation has wiped out that nominal increase in wages, and workers in America have lost 0.5% of their purchasing power so far this year.

Americans will surely have to get used to higher inflation over the next few years, or at least that is what the New York Federal Reserve forecasts, which indicate that consumers will have to get used to 4% inflation. According to the Central Bank’s New York headquarters, inflation will probably close this year at 5.2 %.

Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica

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