Economic & Financial Consulting Firm in Chicago, Illinois

Are we losing the chance for a soft landing?

Peter Bernstein, Chief Economist pbernstein@rcfecon.com, 312-431-1540 x1515
Louise Collis, Senior Economist

September 11, 2026

The Current Situation

The CPI All Items rose 0.4% in August, following a 0.4% decline in June. Year-on-year inflation was stable at 3.4%, down from the recent peak of 4.2% in May. Core inflation (which excludes food and energy) fell to 2.4%, the lowest since 2021 but still above the Fed’s 2% target. Worryingly, producer price inflation is staying high with the PPI increasing 5.4% for the year, and the core PPI (again, excluding food and energy) increasing 5.0%.

The trajectory of Core CPI looks promising. In fact, if we took a simple linear trend from August 2023 and extended it, Core CPI would hit 2% in April next year. Unfortunately, accelerating producer price inflation suggests that consumer inflation will head higher, not lower. Looking back, we see that producer prices began accelerating before the big jump in consumer inflation in 2021 and 2022. Moreover, the 5% increase in core producer prices over the past year indicates that the energy price hikes since the Iran conflict are spilling over into producer prices even if they have not yet had much impact on consumer prices. The record high price of diesel fuel, now over $6/gallon, will raise the cost of transporting goods. It is hard to believe that those costs won’t eventually be borne by consumers.

Fig 1. Figure showing CPI All Items, Core CPI, and Core PPI. CPI was stable at 3.4% in July, down from the peak in May of 4.2%. Core PPI remains very high, with a year on year reading of 5%.

And it seems that people are aware of the situation. The University of Michigan survey of inflation expectations finds the one-year ahead inflation expectation of 4.6%. Two years ago, the expectation for one-year ahead was 2.7%. The New York Fed’s August survey of consumers reports that the one-year ahead expectation for CPI All Items is 3.6% – higher than the value today. And even the five-year ahead value is 3.0%. These surveys suggest people do not expect inflation to return to 2% any time soon.

RCF’s Inflation Scorecard

RCF’s Inflation Scorecard is based on analysis of 20 different price series comprising 98% of the total consumer price index. Each of these price series represents a portion of the CPI based on household spending patterns. For example, food purchased for at-home consumption is about 8% of the typical consumer’s budget; it has a weight of 8.33 out of a total index of 100.

Our scorecard presents two metrics to track month-to-month price increases. The first metric is the share of the index for which inflation in the most recent month is rising (greater than the prior month’s inflation) vs. the share of the index for which inflation is falling (lower than the prior month) or prices fell (deflation).

RCF Inflation Scorecard: August 2026

Fig 2. Figure with falling, stable, and increasing inflation, showing that in May, a 29% share of goods and services had rising inflation, and 26% had inflation above the Fed's target.

Our scoreboard shows that the August inflation numbers were better than the headline numbers suggest. Our first metric shows that 15% of the weighted CPI saw deflation, with prices lower in August than in July. That is unchanged from last month and about average for the last three years. Another 42% of the weighted CPI had lower inflation in August than July. Only 29% of the weighted CPI had rising inflation, meaning that the August price increase was higher than the July price increase.

Our second metric is the share of the weighed CPI that had monthly inflation above 0.2%, a level that corresponds to the Fed’s 2% annual target. Just 26% of the weighted CPI had inflation above target indicating that the 0.4% monthly increase in all prices was due to a few components showing large increases. However, considering the jump in producer prices we wonder if August represents a short-lived silver lining.

Analysis of Individual Components of the Consumer Price Index

Fig 3. Table with year-on-year and month-on-month inflation for 20 components of the CPI, making up 98% of the total index.

Sources: Bureau of Labor Statistics and RCF Calculations 1. Inflation direction indicates whether monthly inflation in August was higher or lower than monthly inflation in July. Deflation means prices fell in August vs July.

Highlights:

Motor fuel prices increased 4% in August and are up 28% year on year. Fuel prices continued to rise in September. Public transportation/airfares, for which fuel is a major input, are up 15% from a year ago.
Household energy prices fell 0.1% for the month, but are up 5% for the year. Electricity prices are down 0.2% in August, and utility gas is down 1.1%. Household fuel oil is up 10% for the month and up 52% for the year.
Food at home is flat for the month and up 2.2% for the year. Food away from home is up 0.3% in August, and up 3.4% for the year.
Rent and owner’s equivalent rent are both up 0.2% in August. Year over year, they are up 2.7% and 3.1%, respectively, a slight improvement on last month and continuing a recent trend of lower than overall inflation.
Lodging away from home is up 2.4% in August after a fall of 2.8% the previous month.
New vehicles are up 0.3% for the month and up 0.6% for the year. Used cars and trucks are up 0.4%, but motor vehicle insurance prices are down 0.8% for the month, following a fall of 0.3% the previous month. Both are down for the year: 2.3% and 5.1% respectively.
Medical care is down 0.2% for the month, and up just 1.6% for the year.