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Data: FRED; Chart: Axios Visuals

The pace at which consumer prices rose in August cooled off by more than expected. But economists are stopping short of declaring that inflation has been transitory.

Why it matters: Since the beginning of the year, the rate of inflation has been above average.

  • However, much of it has been driven by supply chain issues amid a rapidly reopening economy, which has led many to argue that this recent bout of inflation is transitory.

By the numbers: The core Consumer Price Index, which excludes food and energy prices, rose by just 0.1% month over month in August.

  • This was a significant deceleration from the 0.3% increase in July. Economists had expected August's price growth to come in at 0.3% again.
  • The prices of used cars and trucks, which had been particularly hot due to supply chain disruptions, fell by 1.5% during the month.
  • Hotel and motel prices and airline fares, which were boosted earlier this year by the rush to travel, fell by 3.3% and 9.1%, respectively.

What they’re saying: While a lower-than-expected inflation reading may be welcome news to the Federal Reserve, which has been keeping monetary policy very loose, economists caution against declaring victory on rapidly rising prices.

  • “The winds of transitory inflation became crossed this month,” Bank of America U.S. economist Alexander Lin said. He noted that while prices for some notable items fell, prices for other items — including new cars, home furnishings, recreational goods and apparel — rose significantly.

Between the lines: There’s also the matter of the recent resurgence in COVID-19 cases putting a damper on demand, which in turn has helped prices cool.

  • Goldman Sachs chief economist Jan Hatzius wrote that “Delta-sensitive categories contributed -0.13pp” to the monthly decline in core CPI, adding that this “could reverse in coming months if cases continue to fall.”

What to watch: The next few consumer inflation reports will bear watching to see if prices continue to cool, which will be at least partly dependent on the direction of COVID infections.

  • “Inflation from February to July was extraordinarily high: core CPI rose at an 8.0% annual rate,” Jason Furman, a Council of Economic Advisers chairman for President Obama, tweeted. “We always knew that inflation would not continue at an 8.0% annual rate."
  • "The question is will it slow to something like 2% (the Fed's view) or something meaningfully higher (my view).”

Go deeper

Kate Marino, author of Markets
Dec 21, 2021 - Economy & Business

Natural gas prices fall after warm start to winter

Source: FactSet (Henry Hub spot NYMEX); Chart: Axios Visuals

This past fall, surging energy prices were one of the most visible and alarming side effects of the world’s monumental effort to reopen economies all at once.

  • But just a few months later, a warm start to the winter — and worries that the Omicron variant will cause a slowdown — have cut the price of one of America’s main fuel sources nearly in half from its peak.

Transcripts analysis reveals the word on Wall Street in 2021

Expand chart
Data: Sentieo; Note: Chart also includes mentions of “inflationary,” “supply chains” and “variants;” Chart: Baidi Wang/Axios

“Supply chain,” “inflation” and “variant” were among the new top words mentioned at least once on Wall Street calls this year, according to an analysis of transcripts by Sentieo, a research firm.

Why it matters: All the chatter about bottlenecks, rising prices and variant spread that led to more factory shutdowns is another sign of just how big of a headache it was for corporate America (and consumers) this year.

Starbucks drops worker vaccine mandate after SCOTUS ruling

Photo: Jakub Porzycki/NurPhoto via Getty Images

Starbucks announced in a memo to employees Tuesday that it has dropped plans to implement a vaccine mandate for all U.S. workers, AP reported on Wednesday.

Why it matters: The company's decision comes in response to the Supreme Court's ruling last week to block the Biden administration's COVID-19 vaccine-or-test requirement for large employers.

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