Consumers just can’t catch a break.
There was relief at the gas pump last month, but prices spiked for everything from eggs to rent to the dentist, the Labor Department said on Tuesday in a report that dashed hopes inflation was waning and sparked the worst day for stocks in two years.
Overall, the government’s main inflation gauge climbed 8.3 percent in August from a year earlier. While that was slightly slower than July’s 8.5 percent pace, forecasters had expected an even bigger drop given the 26 percent decline in gasoline prices since their mid-June peak at more than $5 a gallon.
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Moreover, the Consumer Price Index data show that inflation is spreading as a wider variety of businesses react to higher wages and brace for their costs to keep rising.
Excluding the often-volatile food and energy categories, so-called core prices rose 6.3 percent from a year ago, the quickest pace since March.
The inflation report all but eliminated any chance that the Federal Reserve would have the leeway to ease up later this year on its aggressive rate increases aimed at reining in prices.
Central bank officials are expected to lift their benchmark federal funds rate by three-quarters of a percentage point, to 3.25 percent, when they meet next week, and continue to hike it throughout the rest of the year. The rate was near zero in March, before the Fed began its inflation-fighting campaign.
The disappointing inflation numbers also complicate President Biden’s bid to paint a rosy economic picture ahead of midterm elections in November when Democrats must defend slim majorities in the House and Senate.
On Wall Street, stocks posted their largest one-day drop since 2020. The Standard & Poor’s 500 index fell 4.3 percent, while yields on US Treasuries shot higher and flashed a recession warning sign.
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When inflation flared up in the early months of 2021, pandemic-related supply chain disruptions were largely to blame.
A shortage of computer chips imported from Asia forced US automakers to cut production, leading to higher prices not only on new vehicles, but also for used cars and rentals. As locked-down homeowners turned to home improvement, lumber was suddenly in short supply, boosting the price of garage doors and fences. When COVID retreated, air travel surged — and so did airfares.
Those kinks were working themselves out when Russia’s invasion of Ukraine in February sent oil prices into the stratosphere. The combination of higher energy costs and the fastest wage growth since the mid-2000s has rippled across the economy.
In August, the cost of medical care rose 5.6 percent compared with a year earlier. Car repair shops jacked up rates by 11 percent, while prices for delivery services accelerated 11.5 percent. Rents were 6.7 percent steeper than a year ago, while the equivalent cost for homeowners rose 6.3 percent.
A look at what’s happening with food prices helps illustrate why inflation is spreading.
First, some numbers: Grocery prices jumped 13.5 percent last month, the largest year-over-year increase since 1979, while the cost of eating out was up 8 percent. Egg prices soared 40 percent, butter was up 25 percent, and milk and chicken each rose 17 percent.
Several forces are at work, according to Parke Wilde, an agricultural economist at Tufts University. A key factor is higher prices for diesel fuel, which is used throughout the food chain, from farm tractors and fertilizer to the cargo ships and the trucks that bring goods to supermarkets.
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A gallon of diesel at retail is up more than 50 percent from a year ago as Europe offsets the loss of Russian supplies by importing more from the United States. The price of regular gas, by contrast, is now just 16 percent higher than last year.
The rising cost of diesel is being passed on to businesses in the form of increased delivery charges.
“Our invoices for freight surcharges are just much higher than we’ve ever seen in the past,” said Greg Saidnawey, owner of Pemberton Farms Marketplace in Cambridge.
The war in Ukraine has disrupted shipments of wheat, corn, and oilseeds, Wilde said, and the growing use of ethanol in gasoline is driving up corn prices. Grains and corn are also used to feed cattle and hogs, so prices for beef and pork are rising. And food distribution is still being affected by backups at some US ports.
This all adds up to higher prices on the grocer’s shelves. At Lambert’s Rainbow Market in Dorchester, the cost of pumpkins has doubled in three years, according to owner Danny Lambert.
With increases like those, customers are buying less: “It used to be a carriage full of stuff,” Lambert said. “Now it’s more day-to-day.”
Not all the trends are bleak, according to Paul Hughes, chief agricultural economist at S&P Global. He notes that a United Nations commodity food index fell for the fifth consecutive month in August, though it remains well above pre-pandemic levels.
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“There’s a small amount of good news on the horizon,” Hughes said.
Correction: An earlier version of this story misstated the price increase for pumpkins at Lambert’s Rainbow Market.
Dana Gerber can be reached at dana.gerber@globe.com. Follow her @danagerber6.