In August, the United States witnessed a notable increase in inflation, with the Consumer Price Index (CPI) reporting a rise to 3.7%. This surge represents the most significant month-to-month escalation since June 2022, as disclosed by the Bureau of Labor Statistics (BLS).
The annual inflation rate, which was at 3.2% in July, experienced an upswing, reaching 3.7% in August, accompanied by a 0.6% monthly increase. It’s important to note that these figures closely aligned with economists’ expectations, as a Reuters survey of economists had predicted respective increases of 3.6% and 0.6%.
A primary contributor to this monthly surge in inflation was the soaring gas prices, which shot up by over 10% in August, constituting more than half of the overall rise. The increase in oil prices and disruptions caused by extreme heat in the Gulf Coast region disrupted refinery and output activities, thus leading to the reversal of gas price trends from the previous months.
Additionally, prices for both shelter and food remained elevated, with shelter prices registering their smallest increase since 2021, albeit continuing to rise for the 40th consecutive month.
The Federal Reserve’s response to this August inflation data remains uncertain. On one hand, there are indications that prices might be stabilizing. Combined with a recent jobs report indicating a cooling economy, this could persuade the central bank to temporarily halt further interest rate hikes. However, Fed chair Jerome Powell, speaking at a recent Kansas City Fed conference in Jackson Hole, Wyoming, emphasized that although inflation had moderated somewhat, it remained at elevated levels. He asserted that central bankers were prepared to tighten monetary policy further if deemed necessary.
Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors, commented on this, stating that any continued easing of economic conditions could shift the narrative away from tightening policies towards potential policy easing. However, this would likely require a more significant economic slowdown than what the Fed had already anticipated, given their consistent message of maintaining higher interest rates for an extended period.
For individuals grappling with the impact of high inflation, one option to consider is taking out a personal loan to manage existing debt at a lower interest rate, thereby reducing monthly financial burdens. To explore personalized interest rates without affecting one’s credit score, Credible offers a valuable resource.
Implications for Social Security Beneficiaries
August’s inflation figures hold implications for Social Security beneficiaries. The Senior Citizens League (TSCL) estimates that based on the August CPI data, these beneficiaries can anticipate a 3.2% increase in their monthly checks for the coming year. A 3% cost of living adjustment (COLA) would translate to an average monthly benefit increase of $57.30, impacting those receiving an average benefit of $1,790.
The Social Security Administration is scheduled to announce the COLA for 2024 in mid-October. It is crucial to note that the COLA calculation for the following year relies on inflation data from the third quarter. In this calculation, inflation figures for July, August, and September are combined and averaged, then compared with the third-quarter average from one year ago. The percentage difference between these figures determines the COLA, which will be disbursed to Social Security recipients beginning in January 2024.
While a 3.2% increase is considerably lower than the record-high 8.7% adjustment received in 2023, it still surpasses the average 2.6% adjustment observed over the past two decades.
TSCL emphasized that despite the recent high COLA, the dollar amount of the increase remains relatively modest, especially for those with an average monthly retiree benefit of $1,790 in 2023. For those grappling with high-interest debt hindering retirement savings, exploring the option of using a personal loan with a lower interest rate can help. Credible offers a platform to shop for personalized loan rates and get pre-approved quickly.
Holiday Shopping Amidst High Inflation
Despite sustained inflation, Deloitte’s annual holiday retail forecast suggests that retail shopping during the upcoming holiday season is unlikely to decelerate significantly. Holiday retail sales are projected to increase between 3.5% and 4.6%, with e-commerce sales anticipated to grow between 10.3% and 12.8% for the 2023 holiday shopping season.
These positive growth projections are underpinned by robust economic data, indicating a soft landing for the U.S. economy. According to Deloitte, healthy employment and income growth are expected to sustain sales volume during the holiday season. However, it’s worth noting that inflation, which played a significant role in boosting the value of retail sales in the previous year, is expected to moderate. Consequently, the total value of retail sales is projected to grow more slowly compared to the previous year. Deloitte’s U.S. Economic Forecaster, Daniel Bachman, cited this moderation and a reduction in pandemic-era savings as factors contributing to lower projected growth for the season.
As consumers seek ways to save on monthly expenses, it’s important to consider options such as reducing insurance premiums. Car insurance, for instance, increased by 2.4% in August, following a 2% increase the previous month, according to the CPI. One effective strategy to lower insurance costs is to shop around for more affordable premiums. Credible’s marketplace facilitates the comparison of multiple insurance providers, helping individuals find the best rates tailored to their needs.