: ‘It masked the full perception.’ Falling gas prices may have skewed expectations for August inflation numbers

by | Sep 13, 2022 | Stock Market

Investors got a rude awakening with Thursday’s hotter-than-expected inflation numbers, and the decline in gas prices since June may have contributed to their sense of shock. Markets plummeted after the release of August inflation data, in part because dropping gas prices over the past few months may have lulled people into thinking inflation was cooling faster than it was. It was another reminder of the psychological sway gas prices hold over consumers and investors alike.

Gas prices declined 10.6% from July to August, according to Tuesday’s inflation data. That reaffirmed the price drop drivers have been seeing in recent trips to the pump and it follows a 7.7% decrease from June to July. But during August, the overall cost of living increased 0.1% and a measure of “core” inflation, which strips out volatile food and energy prices, displayed a sharp 0.6% gain month-over-month. The yearly rate of inflation now stands at 8.3%, the Bureau of Labor Statistics said. It was a disappointing set of numbers at a time when economists were forecasting a 0.1% decline month-over-month that would have taken the year-over-year rate to 7.9%. Consumers were also expecting more price moderation ahead, including gas costs, according to a Monday consumer expectation survey from the Federal Reserve Bank of New York. Those expectations were a reminder of the attention people devote to gas prices — w …

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