Prices made up more than half of the 6.1% rise in US consumer spending over the year to August

Divide 1.061 by 1.026 and you get about 1.034. The same basket of goods and services therefore cost roughly 3.4% more than a year earlier ^[2]. Of the 6.1 points of nominal growth, about 3.5 were price ^[1], or 57% of the total ^[3]. Wolf Richter, who wrote up the Bureau of Economic Analysis release ^[1], said it directly. "These are big growth numbers, and we'll see some bigger ones below, but there was a lot of inflation too," he wrote ^[3].

The same division on the monthly figures gives a price rise of about 0.31% in August alone, or roughly 3.8% at an annual rate ^[4]. That monthly pace is faster than the 12-month rate of 3.4% ^[2].

Most of the dollars went to services, which took 69% of spending ^[4]. Services grew 5.9% in nominal terms ^[5], and weighted by their share they supplied about 4.1 of the 6.1 points ^[5]. Housing alone is 17.9% of consumer spending, and healthcare services are 17.3% ^[6].

Gasoline is the price people see every day. It was the main reason nondurable goods spending rose 1.5% in the month ^[9], and gasoline and other energy goods have grown to 2.3% of all spending from 1.9% before the spike ^[11]. Apply the year's gasoline gain to a slice that size and it adds about half a point to nominal growth ^[6]. Richter made a related point about how small the share is. "This relatively small share of total spending is in effect why the recent gasoline price spikes, and the 2021-2022 food and gasoline price spikes didn't derail the economy," he wrote ^[13].

The case against reading this as an economy running hot starts with August itself. Gasoline added about 0.1 point to the month's nominal rise. Real gasoline spending fell, so its price effect was at least that large, or about a third of the 0.31-point monthly gap ^[7]. Without it, the rest of the basket rose about 0.2 points in the month, roughly 2.5% a year ^[8]. The services gain could also be mostly volume. That would fit Richter's observation that discretionary spending "was particularly motivated" ^[14]. His write-up does not split services into price and volume, and the available text ends before the bond-market evidence his headline refers to ^[12].

I think the report supports a slower path for rate cuts, and the case rests more on the annual numbers than the monthly ones. Take gasoline's half point ^[6] out of the 3.5-point annual gap, and about 3 points of price growth remain in the rest of the basket ^[9]. That view is wrong if the ex-gasoline pace of about 2.5% a year ^[8] holds in the next two reports. In that case August's acceleration came from fuel, and prices elsewhere are cooling.