Inflation in August remained sticky as renewed tensions with Iran continued pushing up oil prices, keeping pressure on the Fed to consider a rate hike at its upcoming meeting. Gasoline prices returned as the largest driver of headline inflation, accounting for one-third of the monthly increase. While consumer goods prices showed signs of stabilization from earlier tariff impacts, recent trade conflicts with Canada could add to inflation pressures in coming months.

On a non-seasonally adjusted basis, the Consumer Price Index (CPI) rose by 3.4% in August from a year ago, following the same increase last month, according to the BLS latest report. The “core” CPI, excluding the volatile food and energy components, increased by 2.4% over the past twelve months, following a 2.5% increase in July. The housing shelter index, which makes up a large portion of the core CPI, rose 3.0% over the year, following a 3.2% increase last month. Meanwhile, the component index for food rose by 2.7% over the year, and the energy component index increased by 16.3%.

On a monthly basis, the CPI rose by 0.4% in August (seasonally adjusted), while the “core” CPI increased by 0.3%. The price index for a broad set of energy sources increased by 2.1% in August, as declines in natural gas (-1.1%) and electricity (-0.2%) were offset by increases in fuel oil (+10.1%) and gasoline (+3.9%). Meanwhile, the food at home index remained unchanged and the food away from home index rose by 0.3 in August.

Outside of energy, other top contributors that rose in August included indexes for communication (+2.3%), lodging away from home (+2.4%), airline fares (+2.7%), education (+0.8%) and used cars and trucks (+0.4%). Meanwhile, the indexes for medical care (-0.2%) and motor vehicle insurance (-0.8%) were among the major indexes that decreased over the month.

The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.3% in August, following a 0.1% increase last month. Both the index for owners’ equivalent rent (OER) and rent of primary residence (RPR) increased by 0.2% over the month.

NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than core inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than core inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). In August, the Real Rent Index fell by 0.1%.