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Economic Forecasts

Used Car Prices Goosing Inflation

Kiplinger’s latest forecast on inflation

Used-car price increases helped push the overall consumer price index up 0.4% in August, and 1.3% over the past twelve months. Used cars have been in demand because of shortages of new cars resulting from production cuts earlier in the year. Gasoline prices rose for the third month in a row as overall economic activity continues to pick up. Car insurance and car rental prices have mostly recovered from their spring tumble.

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Food prices were stable, on average, in August. Meat prices declined for the second month, coming off their highs earlier this spring. Coronavirus outbreaks at meat processing plants had caused meat prices to jump, but increasing production has brought them back down somewhat. Egg prices are also retreating from their recent high, declining in each of the past four months.

The price of medical services paused after five months of hefty increases. It has mostly been driven by rising health insurance costs and hospital charges

The cost of shelter is running lower than normal right now because rent increases have been slowed by the pandemic. But shelter costs may rise a bit faster later this year as rents pick up.

The overall inflation rate will stay moderate, ending the year at 1.2%, far below last year’s 2.3%. Core inflation, which excludes the costs of food and energy, will continue to run higher than the headline rate, at about 2% over the course of this year.

Print-ready Consumer Price Index chart

A note about data reliability: An issue that government data collectors face is that at the moment, they cannot go into stores that are shut down and collect price data. Therefore, the reliability of some of the numbers may be suspect, though the Bureau of Labor Statistics managed to obtain three-fourths of their normal price quotes online and through other means. The BLS also has statistical procedures in place to keep missing data from biasing the overall numbers.

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