Weekly Economic Trends and Indicators

The Headlines:

The Bureau of Labor Statistics (BLS) recently reported that the consumer price index (CPI) increased by 0.4% in August on a seasonally adjusted basis. For comparison, the CPI increased by 0.3% in June and 0.2% in July. The 12-month inflation rate of the CPI was 2.9% before seasonal adjustment. This was up from 2.7% in July and the highest 12-month CPI inflation rate since January.

On Friday, the Bureau of Economic Analysis (BEA) reported that the Federal Reserve’s preferred measure of inflation, the personal consumption expenditure (PCE) price index, increased by 0.3% in August on a seasonally adjusted basis, in line with expectations. The 12-month PCE inflation rate was 2.7%, up from 2.6% in both June and July.

The Details:

The current level of inflation by either of these measures is certainly higher than the Federal Reserve’s stated goal of 2.0%. While inflation has remained in a narrow range this year, this level is still concerning. Even more concerning are the emerging trends in certain goods that could signal higher inflation on the way.

According to CPI data, meat prices have increased 7.3% in the last 12 months with a 1.8% jump in August. Fresh vegetable prices increased 3.0% in August, following a 1.2% increase in July. Coffee prices are up 20.9% over the last 12 months with monthly increases of 2.2%, 2.3%, and 3.6% in June, July, and August, respectively. Other goods and services seeing significant price increases include men’s and women’s apparel, used cars and trucks, and motor vehicle repairs. Energy prices, in contrast, have been well-contained with negative inflation rates in most categories over the last 12 months. Gasoline prices are down 6.6% over the last year. The lower energy prices have brought overall inflation down from where it otherwise would be.

The Context:

Some of the price increases in goods like apparel, vegetables and coffee are evidence that tariffs are starting to make their way into consumer prices. The lower inflation rate in the PCE—especially in goods—indicates that consumers may be substituting away from some of the items where prices are rising the fastest.

How does the Midwest economy stack up against the national numbers on inflation? Overall, CPI inflation in August and over the last year in the Midwest has mirrored the national economy. However, when you look at the details, several differences emerge. The Midwest is seeing a larger price spike in nearly every category of food. Fruit and vegetable prices were up 2.4% in the Midwest in August—double the rate for the U.S. Gasoline prices were up more in the Midwest in August compared to the rest of the country, despite a lower 12-month inflation rate over the year.

Next week: Local labor market update