Stimulus Update: As Inflation Ticks Upward in August, Consumers Remain Desperate for Relief

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KEY POINTS

  • Economists were expecting inflation levels to decline in August, but that didn't happen.
  • Many households are still struggling with higher living costs in the absence of stimulus aid.


Inflation levels rose modestly last month, and not shockingly, a lot of people are still struggling because of that.

Inflation has been rampant since the start of the year. Because of that, Americans have increasingly had to dip into their savings and rack up debt just to pay the rent, put gas in their cars, and feed their families.

Economists were hoping that inflation levels would decline to a reasonable degree in August. But last month, the Consumer Price Index (CPI), which measures changes in the cost of consumer goods, rose 0.1% compared to July, as per the U.S. Bureau of Labor Statistics. On an annual basis, the index was up 8.3%.

Why the increase?

Given the way gas prices dropped during the month of August, economists were hoping to see a lower reading from the CPI. But while the gasoline index did decline, other expenses rose enough to offset it. The food index, for example, rose 0.8% compared to the previous month.

Will higher inflation levels spur a stimulus round?

Many Americans have been outraged that lawmakers haven't stepped in with stimulus aid at a time when inflation has been wreaking havoc. But the reality is that August's CPI data is unlikely to fuel another stimulus round for one big reason -- doing so might actually make matters worse.

A big part of the reason inflation has been so out of hand this year is that in 2021, Americans saw stimulus checks hit their bank accounts right when supply chains started slowing down due to the impact of the pandemic. That disconnect between supply and demand led to higher prices as consumers found themselves with money to spend and not enough products to buy.

If lawmakers were to approve another stimulus round now to help Americans cope with inflation, it could end up driving the cost of goods upward rather than have the opposite effect. That, coupled with our strong economy and job market, is reason enough to believe that we won't be seeing a stimulus round go out at any point in 2022.

Now it's worth noting that a number of states have decided to take stimulus matters into their own hands this year. Those with excess funds in their budgets have been dishing out stimulus aid to qualifying residents. And some people may still be in for a state-sponsored payday if they haven't received one yet.

But at the federal level, we shouldn't expect another stimulus round. Instead, consumers will, unfortunately, need to find other ways to manage in the face of inflation. For some, that may have to mean rethinking expenses or taking on second jobs to cover their costs in full.

Those who didn't yet file a 2021 tax return but are due a refund should also try getting that task completed as soon as possible. There's no penalty for being late with a tax return when there's a refund to be had. But delaying that money is akin to a penalty, so those due a refund should get moving on their taxes, as a check from the IRS is a good way to make up for an absent check from the federal government.

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