US inflation stays high as diesel hits record and home sales slow

Fresh US data showed stubborn inflation, record diesel prices and weaker home sales. The figures underscored how fuel and borrowing costs are straining consumers, businesses and markets.

In Short

• Consumer prices rose 0.4 per cent in August, faster than July
• Producer price growth quickened as oil and gas costs remained elevated
• Existing home sales fell for a third month amid higher mortgage rates

A fresh set of economic data and market moves in the United States kept the focus this week on inflation, fuel prices and the pressure they are putting on households and businesses. Higher costs at grocery stores and petrol stations remain a strain, while borrowing costs are also weighing on the housing market.

The latest updates showed inflation remained elevated, diesel prices climbed to a record, and wholesale prices rose as higher oil and gas costs persisted amid renewed fighting in the Middle East. At the same time, US home sales slowed as mortgage rates moved higher, unemployment claims stayed low, and stocks rose on Friday after oil prices eased.

US inflation accelerated last month as gas prices spiked in the wake of renewed fighting in the Middle East. The Labour Department said on Friday that the consumer price index rose 3.4 per cent in August from a year earlier, the same annual rate as in July. On a monthly basis, however, prices rose 0.4 per cent from July to August, compared with an increase of 0.1 per cent in the previous month. The figures showed inflation remains elevated more than five years after prices first surged as the economy emerged from the COVID pandemic. Persistent inflation has posed a major challenge for the Federal Reserve and has soured many voters on the Trump administration's economic management as midterm elections draw closer.

Diesel prices in the US also hit another record on Friday, rising past USD 6 a gallon on average as Washington's war with Iran disrupted global fuel flows. According to motor club AAA, the national average stood at USD 6.05, up from USD 5.85 last week and USD 3.70 at the same time last year. Higher diesel prices raise transport costs for a wide range of everyday goods because diesel is widely used across freight and delivery networks. Some businesses have already passed on these higher costs to consumers through added fees on online orders and mailed packages.

Wholesale inflation also picked up last month after easing earlier in the summer, adding to signs that price pressures remain stubborn. The Labour Department said on Thursday that the producer price index, which measures inflation before it reaches consumers, rose 5.4 per cent in August from a year earlier, up from 4.8 per cent in July. Annual wholesale inflation had peaked at 5.9 per cent in May after the Iran conflict lifted energy costs. On a monthly basis, wholesale prices rose 0.4 per cent from July to August, after a 0.1 per cent increase in the previous month. Inflation has shown some signs of easing in recent months, but consumers are still facing higher prices for gas, groceries, clothing and other essentials. US oil prices rose above USD 100 a barrel on Thursday on renewed fighting in the Middle East, while President Donald Trump intensified a trade war with Canada, raising the possibility that tariffs could further increase costs. Rising prices have also created a political problem for the Trump administration and Republicans contesting the midterm elections.

In the housing market, sales of previously occupied US homes fell in August to their slowest annual pace in more than a year as buyers dealt with higher mortgage rates and home prices. The National Association of Realtors said on Thursday that existing home sales declined 2 per cent from July to a seasonally adjusted annual rate of 3.98 million units. That marked the third straight monthly fall. Sales were also down 1.2 per cent from August last year and came in just below the 4 million pace expected by economists surveyed by FactSet.

Mortgage rates rose for the third straight week, pushing the average long-term home loan rate in the US to its highest level in more than 14 months. Freddie Mac said on Thursday that the average rate on a 30-year fixed mortgage rose to 6.76 per cent from 6.71 per cent last week. A year earlier, it was 6.35 per cent. The average is now at its highest since June 26, 2025, when it was 6.77 per cent. Rates on 15-year fixed mortgages, often used by borrowers refinancing a home loan, also moved up, rising to 6.09 per cent from 6.04 per cent last week. A year ago, that rate stood at 5.5 per cent. Higher mortgage rates can add hundreds of dollars a month for borrowers, reducing buying power and prompting some homebuyers to delay purchases.

On the jobs front, slightly fewer Americans filed for unemployment benefits last week, suggesting layoffs remain limited. The Labour Department said on Thursday that claims dipped to 206,000 from a revised 207,000 a week earlier. The four-week average, which smooths weekly volatility, also slipped to 206,000. Economists watch jobless claims closely because they can signal where the labour market is heading, and for the past year claims have largely stayed within a historically low range of 200,000 to 230,000 a week.

US stocks rebounded on Friday after oil prices eased, though markets still struggled to finish the week in positive territory. Inflation data that broadly matched economists' expectations also helped steady sentiment. The S&P 500 rose and was on track to end a four-day losing run, its longest since June, while the Dow Jones Industrial Average and the Nasdaq also moved higher. Markets were helped by a pullback in oil prices after a sharp run-up earlier in the week linked to the war with Iran. Brent crude, the international benchmark, fell 3 per cent to USD 104.42 a barrel after nearing USD 110 overnight.

Overall, the week in the US economy pointed to continued pressure from high prices even as some parts of the labour market remained steady and stocks found relief at the end of the week. Inflation, fuel costs, housing and borrowing rates remained central to how households, businesses and investors navigated the latest developments.

With PTI Inputs

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