Consumer price index September 2022: | So Good News
Prices consumers pay for a variety of goods and services rose more than expected in September as inflationary pressures continued to weigh on the US economy.
The number of consumers increased 0.4% for the month, more than the 0.3% index of the Dow Jones, according to the Bureau of Labor Statistics. On a 12-month basis, so-called headline inflation rose to 8.2%, from a peak of around 9% in June but still hovering near the highest level since the early 1980s.
Excluding unchanged food and energy prices, core CPI was the highest for the month, running 0.6% against the Dow Jones estimate of a 0.4% increase. Inflation rose 6.6% from a year ago, the biggest 12-month gain since August 1982.
The report sent shockwaves through financial markets, with stock market futures falling and Treasury yields rising as investors braced for higher interest rates from the Federal Reserve. However, those early losses rebounded in morning trading, and the Dow Jones Industrial Average rose more than 800 points by 1:30 pm ET.
“The Federal Reserve has made it clear that it’s committed to price stability, it’s committed to reducing inflationary pressures,” said Michelle Meyer, director of US economics at the Mastercard Economics Institute. “The rate of inflation comes above their expectations, they will need to confirm this commitment, which means that interest rates will cool down in the lower economy.”
Another sharp increase in food prices boosted the headline number. The food index rose 0.8% for the month, the same as August, and was up 11.2% from a year ago.
The increase helped offset a 2.1% drop in electricity prices that included a 4.9% drop in fuel prices. Energy prices rose sharply in October, with the price of regular gasoline at the pump about 20 cents higher than a month ago, according to AAA.
The closely watched inflation, which makes up a third of the CPI, rose 0.7% and is up 6.6% from a year ago. Transportation services also showed a big hit, increasing 1.9% month-on-month and 14.6% year-on-year. Healthcare spending rose 1% in September.
The increase in prices meant bad news for workers, whose hourly wages fell by 0.1% in the month of inflation and are down 3% from a year ago, according to a separate BLS release.
Inflation is rising despite the Federal Reserve’s efforts to raise rates.
The central bank has raised interest rates by 3 percent since March. Thursday’s CPI data is expected to tie for a fourth consecutive quarter of 0.75 percent when the Fed meets Nov. 1-2, and traders are giving a 98% chance of that move.
The odds of a fifth straight three-quarter hike are also rising, with futures rates expected to be 62% in line with inflation.
Inflation rose despite problems in other key areas that policy makers are seeing.
For example, prices for used cars fell by 1.1% and clothing fell by 0.3%. Egg prices fell, down 3.5% for the month despite rising 30.5% from a year ago.
However, air fares rose after consecutive monthly declines, up 0.8% on the month and up 42.9% from a year ago.
How inflation has hurt consumers will become clearer Friday, when the Commerce Department and Census Bureau release their September retail sales report. The data, not adjusted for inflation, is expected to show a monthly increase of 0.3%, with no change excluding car sales.
Meyer, Mastercard’s chief economist, said consumer spending remains strong despite inflationary pressures.
“The increase in prices is causing a little heat because consumers have more purchasing power,” he said. “Investors are still spending money through rising inflation, and the challenge is even greater for the Fed to restore the economy.”
Falling housing prices will eventually lead to rents being caught up, which will reduce the rate of inflation, Meyer added.
Consumer spending has picked up slightly thanks to the stimulus money left over from Covid-related spending and a labor market that has remained stable despite the economic slowdown. Nonfarm payrolls rose 263,000 in September and the unemployment rate fell to 3.5%, tied for the lowest since late 1969.
Unemployed complaints for last week Oct. 8 totaled 228,000, an increase of 9,000 from the previous week, the Labor Department said Thursday. This was slightly ahead of the estimate of 225,000 but still shows that layoffs are low.