Inflation eases but remains elevated
Consumer prices rose 3.4% in August from a year earlier, below the 3.7% increase economists had expected. However, prices climbed 0.3% from July, compared with a 0.1% monthly gain in the previous period. The figures showed some relief, but they also indicated that inflation remained persistent.
Core inflation, which excludes volatile food and energy prices, increased 3% from the previous year. On a monthly basis, core prices rose 0.2%, slightly above July’s 0.1% gain. U.S. markets moved higher after the report as investors considered whether the Federal Reserve might delay another expected interest-rate increase.
Consumer demand supports continued growth
Despite elevated prices, Americans increased their spending by 0.9% from July to August. High costs continued to affect household finances because paychecks were growing more slowly than prices. Gas, groceries and other necessities remained difficult for many consumers to afford.
Meanwhile, the economy expanded at a 2.2% annual pace during the July-September quarter, according to a separate government report. Analysts expected growth to accelerate to 3% in the current quarter. Strong consumer spending could help produce that pickup.
Revisions reshape the earlier inflation reading
July’s annual inflation rate was revised from 3.7% to 3.4% after the government updated its measurement methods. The changes affected categories such as investment management, computer software and accessories, and legal services.
For example, officials reduced the weight assigned to certain computer accessories whose prices had surged amid demand from the artificial intelligence buildout. As a result, higher computer-equipment prices now have less influence on the inflation measure watched closely by the Federal Reserve.
References
Rugaber, C. (2026, September 30). Inflation cooled slightly last month even as consumers stepped up spending. AP News. https://apnews.com/article/consumer-spending-inflation-tariffs-wages-01d0c6f32f74d9101a39ca6007813b61