Inflation in the United States rose more than anticipated in September, reaching its highest annual rate in three years.
The Labor Department reported on Thursday that the Consumer Price Index (CPI)—a measure of everyday goods and services such as gasoline, groceries, and rent—increased by 0.2% from the previous month and was up 2.4% compared to a year ago.
Economists surveyed by LSEG had predicted a smaller annual increase of 2.3% and a monthly rise of 0.1%.
The higher-than-expected figures suggest that while inflationary pressures are easing compared to last year’s peaks, they remain a concern.
Prices continue to sit above the Federal Reserve’s target inflation rate of 2%, posing ongoing challenges for policymakers.
Core inflation, which strips out volatile food and energy prices to provide a clearer picture of underlying trends, rose by 0.3% month-over-month and 3.3% year-over-year.
These numbers slightly exceeded economists’ expectations of a 0.2% monthly increase and a 3.2% annual rise.
A significant portion of the increase in core inflation came from shelter costs, which rose 0.2% from August and are up 4.9% over the past year.
Shelter prices accounted for over 65% of the total 12-month increase in the core inflation index excluding food and energy.
Other areas with notable year-over-year price increases include:
- Motor Vehicle Insurance: Up 16.3%
- Medical Care: Up 3.3%
- Personal Care: Up 2.5%
- Apparel: Up 1.8%
Airline fares increased by 3.2% in September compared to August, slightly less than the 3.9% rise the previous month, resulting in a 1.6% annual increase.
Food Prices Continue to Rise
Consumers are also feeling the pinch at the grocery store. Food prices edged higher, increasing 0.4% monthly and 2.3% annually.
The “food at home” index rose 0.4% from the previous month but had a smaller annual increase of 1.3%.
Prices for food away from home were up 0.3% monthly and 3.9% from a year ago.
Specific increases over the past year include:
- Beef and Veal: Up 4.2%
- Pork: Up 1.5%
- Poultry: Up 0.5%
- Eggs: Surged 39.6% annually after climbing 8.4% in September compared to August
Energy Prices Offer Slight Relief
Energy prices provided some respite, declining 1.9% in September from August and down 6.8% compared to a year ago.
However, the volatility in energy costs continues to be a factor in overall economic stability.
Jobless Claims Hit Highest Level Since August 2023
Adding to the economic complexity, jobless claims have reached their highest level since August 2023.
The rise in unemployment claims signals potential softening in the labor market, which could have ripple effects on consumer spending and economic growth.
Federal Reserve Faces Tough Decisions Ahead
The latest inflation data arrives as the Federal Reserve grapples with balancing its mandate to control inflation without stifling economic growth.
With inflation still above the target rate and jobless claims on the rise, the Fed faces a challenging environment as it approaches its next policy meeting scheduled for November 6-7.
Market analysts are closely watching the Fed’s potential moves.
Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley, noted, “One slightly hotter-than-expected CPI reading doesn’t mean a new wave of inflation has been unleashed, but the fact that it accompanied a jump in weekly jobless claims may add to short-term market uncertainty. We’re in a ‘good news is good, bad news is bad’ environment, and these weren’t good numbers—but that doesn’t mean they upended the larger outlook for solid economic growth and moderate inflation.”
Consumers Continue to Feel the Strain
High inflation continues to strain U.S. households, particularly affecting lower-income Americans who spend a larger portion of their income on essentials like food and housing.
The combination of rising prices and increased jobless claims adds pressure on families.