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Inflation in metro Houston remained subdued in August and well below the national level. The local annual rate rose modestly to 1.3 percent from 0.8 percent in June but remained less than half the 3.4 percent national rate. Softer housing costs continue to be a major reason for Houston’s lower inflation, with shelter prices declining locally while still rising nationwide. National inflation was essentially unchanged, easing slightly from 3.5 percent in July, with elevated fuel costs continuing to add to overall price pressures.

The 3.4 percent national inflation rate matched economists’ expectations in a recent Wall Street Journal survey. But core inflation, which excludes volatile food and energy costs, came in higher than expected at 2.5 percent year over year. The firmer core reading could increase pressure on the Federal Reserve to raise interest rates, potentially as soon as its meeting next week.

Shelter costs fell 0.6 percent over the year in Houston, compared with a 3.0 percent increase nationally. Even after excluding shelter, local prices rose just 2.3 percent versus 3.6 percent nationwide, meaning that Houston’s lower inflation extends beyond housing. Food and transportation costs increased more slowly locally, though gasoline prices remained more than 30 percent above their level a year ago. A few other categories, including household furnishings and recreation, posted larger increases in Houston.

The next release of CPI data will be on Wednesday, October 14.

Colin Baker
Director of Economic Research
bakerc@houston.org