Armstrong Economics: 14-09-2026,
Consumer prices in the USA rose 0.4% in August, four times July’s 0.1% increase, while annual inflation remained at 3.4%. The politicians will point to that 3.4% number and pretend inflation has somehow stabilized. But look beneath the surface and you see an entirely different economy. Energy rose 2.1% in a single month and 16.3% from a year ago. Gasoline jumped 3.9% in August alone and is now 27.4% higher than a year ago. Other motor fuels, including diesel, surged 9.6% in one month and 44% annually. This is precisely why reducing inflation to one government statistic is absurd.
The August Producer Price Index already rose 0.4% for the month and 5.4% annually, while processed goods for intermediate demand jumped 1.8%. Diesel prices at the producer level surged 24.1% in August. Those costs work their way through the entire economy. Businesses either raise prices, reduce margins, cut workers, or close. There is no fifth option.
Food increased only 0.1% for August and grocery prices were unchanged, but that does not mean Americans suddenly received relief. Food prices remain 2.7% higher than a year ago. Eggs rose another 2.9% during August. Eating at restaurants continues to rise, and households are still paying the snowballing increase from the inflation that already occurred. Government economists speak as though a lower rate of inflation means prices went back down. They did not. If something rises from $100 to $120 and then increases another 3%, you are not recovering purchasing power.