Housing and medical costs remain the two biggest drivers of inflation.
The consumer price index (CPI) increased by 0.2% in August, more than expected, according to a Bureau of Labor Statistics on Friday.
Economists had forecast that the measure of price changes rose 0.1%. Year-on-year, the index increased by 1.1% (1% expected), with both shelter and medical costs leading gains on an unadjusted 12-month basis.
A shortage of affordable housing inventory amid strong demand from buyers has pushed up costs. The same thing is happening for renters; the vacancy rate fell to a 30-year low in the second quarter.
Healthcare prices are growing at a faster rate than overall inflation amid pricier medical costs following the implementation of the Affordable Care Act. Iincreased drug costs are being passed on to consumers in the form of higher premiums.
In August, the energy index was flat. Gas prices fell, but increases in natural gas and electricity prices offset that drop.
The food index was also unchanged, and was flat over the past 12 months for the first time since February 2010 as grocery costs stayed the same.
Core CPI, which excludes volatile food and energy costs, increased by 0.3% month-on-month, and by 2.3% year-on-year. Economists had forecast gains by 0.2% month-on-month, and by 2.2% year-on-year.
Sluggish inflation is one of the main reasons why the Federal Reserve is raising interest rates slowly. The index of personal consumption expenditures (PCE), which measures price changes of consumer products and better reflects spending habits, is the Fed’s preferred way to gauge inflation.