Inflation wasn’t so bad in September–as long as you didn’t eat or use any energy.
Headline inflation measured by the Consumer Price Index rose 0.4% from August and climbed at a 5.4% year over year rate.
Core inflation, which excludes increases in the prices of food and energy on the grounds that they’re “volatile,” rose by 0.2% from August. (And, of course, you and I don’t have to pay higher prices when they’re “volatile” right?)
Economists surveyed by Bloomberg were looking for a 0.3% monthly gain in prices from August and a 0.2% increase in the core inflation rate.
There’s little indication in this report of any decrease in the supply chair pressures that are raising costs for businesses. (Which, of course, get passed on to consumers.)
And there’s bad news in this data for the Federal Reserve and its hopes that current inflation pressures will be “transitory.” Inflation pressures seem to be moving out into new parts of the economy. And some of those new areas of inflation have long structural tails and are thus likely to push up inflation numbers for months or quarters. For example, rent of a primary residence jumped 0.5% in the month, the most since 2001, while a measure of homeowners’ equivalent rent posted the biggest gain in five years. Shelter costs make up about a third of the CPI and increases in shelter costs are decidedly sticky.
Consumers are also experiencing higher prices for new vehicles and household furnishings and supplies, which increased by a record 1.3%, the report showed.
A New York Fed survey out yesterday showed U.S. consumers’ expectations for inflation continued to rise in September, with 1-year and 3-year expectations accelerating to record highs.
All this certainly adds to the likelihood that the Federal Reserve will begin to reduce its $120 billion in monthly purchases of Treasuries and mortgage-backed assets in November.
The only “good” news in the report: Since Social Security payments are pegged to increases in CPI inflation measured in this part of the year, recipients of Social Security checks will see a 5.9% jump in monthly payments beginning in January. It’s one of the largest increases in the last 40 years.
On the other hand, higher consumer prices continued to eat into the buying power of wages. Inflation-adjusted average hourly earnings rose 0.2% in September from a month earlier, but are down 0.8% from a year ago.
