US Inflation Edges Slightly Higher in September, Defying Expectations

Strategic Insights -

US inflation rose 3 percent in September, the fastest annual pace since the start of the year, but economists had been expecting slightly more intense price pressures. The Consumer Price Index, released 10 days late due to the government shutdown, was lower than the previous 2.9 percent level. Core inflation, which strips out volatile items like energy and food prices, eased slightly to 3 percent.

Key Takeaways:

  • The Consumer Price Index (CPI) rose 3 percent from a year earlier, the fastest annual pace since the start of the year.
  • Core inflation, which strips out volatile items, eased slightly to 3 percent.
  • Economists had been expecting slightly more intense price pressures, but the actual inflation rate was lower than expected.
  • The delay in the release of the data stemmed from the government shutdown, which forced the Bureau of Labor Statistics to suspend operations.
  • The Fed is widely expected to lower interest rates again next week to shore up the labor market.
  • The issue of accurate data collection has become particularly acute for measuring price pressures across the economy.
  • The official government statistics are considered the "gold standard" for economic data, but alternative sources are not as comprehensive.
  • Jerome H. Powell, the Fed chair, recently stated that it was no longer accurate to describe the labor market as "very solid".
  • Inflation has been stuck above the Fed's target for roughly five years and has picked up in recent months.
  • Prices for a range of consumer goods have risen as a result of Mr. Trump's tariffs, which include levies on nearly all of the country's trading partners and sector-specific ones on products like cars and lumber.
  • Food prices have risen significantly this year, including for coffee and beef.
  • Prices for furniture and apparel have also risen, but in other categories like cars, price increases have been more contained.

Statistics:

  • The CPI rose 3 percent from a year earlier.
  • Core inflation eased slightly to 3 percent.
  • The delay in the release of the data stemmed from the government shutdown, which forced the Bureau of Labor Statistics to suspend operations for 10 days.
  • The Fed is expected to lower interest rates again next week by a quarter of a percentage point, bringing interest rates down to a range of 3.75 percent to 4 percent.
  • Inflation has been above the Fed's target for roughly five years and has picked up in recent months.
  • The effective tariff rate is now estimated to be around 18 percent, the highest level since the 1930s.
  • Coffee prices are still up nearly 19 percent for the year.
  • Furniture prices rose 0.4 percent in September, while apparel prices rose 0.7 percent.
  • New car prices rose only 0.2 percent in September, while prices for used cars and trucks fell 0.4 percent.

Sources:

  • "Consumer Price Index" report released by the Bureau of Labor Statistics on October 11, 2023.
  • White House press secretary Karoline Leavitt statement on October 11, 2023.
  • Aditya Bhave, senior economist at Bank of America, statement on October 11, 2023.
  • Veronica Clark, economist at Citigroup, statement on October 11, 2023.
  • Jerome H. Powell, Fed chair, statement at a recent event.