Inflation was still higher than expected in August even as gas prices experienced a sharp decline this summer. The consumer price index report for August rose .1% despite experts' predictions it would moderate.
Economists expected inflation to drop by .1% percent according to Dow Jones estimates. In August, overall inflation was 8.3% higher than one year ago. Stocks fell sharply on the news Tuesday. The Dow Jones tumbled nearly 1,300 points, its largest drop since June 2020.
“What we saw happen on Wall Street today was a little scary and, you know, one of the challenges is that the economists had predicted that the economy was going to be getting better with inflation and obviously, that report did not reflect that today,” said Cathy DeWitt Dunn, President & CEO of DeWitt & Dunn Financial Services.
A sizable drop in gas prices in August was offset by increases in food, cars and shelter.
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INFLATION CONCERNS
“Food is a big cost. Gasoline has been and it will be again. I'm just very nervous about the economy,” said Plano shopper David Hooper.
Potentially compounding problems is the looming threat of a strike by about 60,000 railroad workers if a union deal over pay and scheduling isn't reached by Friday, a move that would further snarl the supply chain.
“That'll just kill the economy. We gotta settle that and not let them strike,” said Hooper.
So, what should investors do now? Dunn says two things: Don't panic and have a plan.
“The last thing you want to do is to sell when you're at the bottom,” said Dunn.
Tuesday’s report could pressure the Federal Reserve to raise interest rates again when it meets next week. 30-year mortgage rates hit a 14-year high now standing at more than 6%.
