US markets sink on unexpectedly high inflation

Joe Biden has called bringing down inflation his top priority
US President Joe Biden

Inflation in the US remained unexpectedly high last month, news that drove Wall Street to its worst day in more than two years.

Prices rose 8.3% in the 12 months through August, the Labor Department said, faster than the 8.1% that economists had expected.

That was down from 8.5% in July, driven by lower petrol costs. But the costs of food, housing and medical care continued to surge, disappointing investors.

The Dow Jones Industrial Average sank nearly 4%, the S&P 500 dropped 4.3%, and the Nasdaq plunged more than 5%.

It marked the steepest day of declines since June 2020.

For US President Joe Biden, whose approval ratings fell below 40% earlier this year amid cost of living concerns, the report was also a troubling sign ahead of the national elections in November. They will determine whether Mr Biden’s Democrats maintain their slim control of Congress.

    Inflation in the US peaked at 9.1% in June, the fastest increase seen since the early 1980s. It fell to 8.5% in July, as petrol prices fell, easing again last month.

    In a statement on Tuesday, Mr Biden focused on the improvement, saying: “Overall, prices have been essentially flat in our country these last two months: that is welcome news for American families, with more work still to do.”

    Speaking to reporters en route to Delaware later in the day, the Democratic president said he was not concerned about the latest inflation report.

    Earlier, Mr Biden hosted a White House event to celebrate a month since passage of the Inflation Reduction Act, a spending bill that a nonpartisan congressional scorekeeper found would have no meaningful impact on consumer prices.

    Money worries remain at the forefront of many consumers’ minds.

    The cost of groceries in the US jumped 13.5% in the 12 months to August, while housing costs climbed 6.2% and medical care rose 5.6%.

    Energy costs, one of the big drivers of inflation also remain far higher than a year ago, despite dropping sharply in the past two months, falling more than 10% from July to August, the Labor Department said.

    Overall the consumer price index, which tracks goods and services across the economy, was up 0.1% from July to August, as the fall in petrol costs was offset by increases in other areas.

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