The numbers: The cost of goods and services rose sharply in August for the third month in a row, but the increase mostly stems from a rebound in prices after a steep decline early in the coronavirus pandemic. Overall inflation is still quite low.
The consumer price index, a measure of the cost of living, rose 0.4% last month, the government said Friday. Economists polled by MarketWatch had forecast a 0.3% advance.
The increase in August followed back-to-back 0.6% advances in July and June.
Yet the cost of most goods and services had declined in the first three months of the pandemic aside from certain items such as toilet paper or meat that were in either high demand or short supply.
Even after three straight increases in the CPI, inflation remains low. The increase in consumer prices over the past 12 months moved up to 1.3% from 1%.
At the start of 2020, the yearly pace of inflation was much higher at 2.5%.
Another closely watched measure of inflation that strips out food and energy also rose 0.4% last month. The yearly increase in the so-called core rate edged up to 1.7% from 1.6%.
What happened: A sharp increase in the cost of used cars and trucks was the biggest contributor to the rise in consumer prices last month. They jumped 5.4% — the largest gain in 51 years.
The cost of oil rose a smaller 2% in August after bigger gains earlier in the summer, but it also added to the upward pressure on prices.
The cost of rent, home furnishings, recreation, car insurance and airfare also rose last month.
Notably, grocery prices fell. They surged in the first few months of the pandemic as Americans stocked up, but prices have since leveled off.
Even after these recent increases, consumer prices are little changed from earlier in the year. Companies don’t have the ability to raise prices much with the economy still recovering from the shutdowns earlier in the year and millions of Americans still out of work.
Big picture: Inflation is still running well below the Federal Reserve’s 2% target and is not expected to pose a problem to the economy until the pandemic subsides. The Fed plans to keep interest rates extremely low for at least the next year or two, a strategy it can afford to pursue given the low rate of inflation.