US inflation rises 5.4% from year ago, matching 13-year high
Another surge in consumer prices in September pushed inflation up 5.4 per cent from where it was a year ago, matching the highest shift since 2008 as tangled global supply lines continue to create havoc.
US consumer prices rose 0.4 per cent in September from August as the costs of new cars, food, gas, and restaurant meals all jumped.
The annual increase in the consumer price index matched readings in June and July as the highest in 13 years, the Labor Department said on Wednesday. Excluding the volatile food and energy categories, core inflation rose 0.2 per cent in September and 4.0 per cent, compared with a year ago. Core prices hit a three-decade high of 4.5 per cent in June.
The unexpected burst of inflation this year reflects sharply higher prices for food and energy, but also for furniture, cars, televisions, and other largely imported goods. COVID-19 has shut down factories in Asia and slowed US port operations, leaving container ships anchored at sea, and consumers and businesses paying more for goods that may not arrive for months.
“Price increases stemming from ongoing supply chain bottlenecks amid strong demand will keep the rate of inflation elevated, as supply-demand imbalances are only gradually resolved,” said Kathy Bostjancic, an economist at Oxford Economics, a consulting firm. “While we share the Fed’s view that this isn’t the start of an upward wage-price spiral, we look for inflation to remain persistently above 3.0 per cent through mid-2022.”
The latest inflationary data makes it even more likely that the US Federal Reserve will soon begin reducing its US$120 billion a month in bond purchases, which are intended to keep longer-term interest rates low. Most analysts expect the Fed to announce such a move at its next meeting on November 3.
Higher prices are also outstripping the pay gains many workers are able to obtain from businesses, which are having to pay more to attract employees. Average hourly wages rose 4.6 per cent in September from a year earlier, a healthy increase, but not enough to keep up with inflation.
One good sign in September was that prices fell or moderated in categories that had been initially pushed much higher by the pandemic. Those declines kept core price increases from worsening.
Used car prices declined 0.7 per cent last month, the second straight drop, after costs soared over the summer as consumers, unable to find or afford a new car, turned to used instead.
The costs for hotel rooms, car rentals, and airline tickets also all fell last month, as the Delta spike in COVID-19 cases limited travel plans.
New cars, however, are growing increasingly expensive, with costs rising 1.3 per cent in September, and 8.7 per cent compared with a year ago.
Gas prices jumped 1.2 per cent last month and have soared more than 42 per cent, compared with a year ago. Electricity prices rose 0.8 per cent in September from August.
Housing costs also rose at a strong clip, as builders say they cannot find all the parts and workers they need to build new homes as quickly as they’d like. Rents rose 0.5 per cent in September, and a measure of home prices climbed 0.4 per cent.
Higher inflation has raised pressure on the US Federal Reserve, which has pegged its benchmark interest rate at nearly zero to spur more borrowing and spending. Yet inflation is far above its target of 2.0 per cent. Chair Jerome Powell has repeatedly said that the price gains should “abate” next year, bringing inflation closer to the target.
The price gains are a vulnerability for President Joe Biden, who has been accused by Republicans for spurring inflation with his US$1.9-trillion rescue package enacted in March of this year.
The White House said on Wednesday that it has helped foster an agreement to keep the Port of Los Angeles open 24 hours a day, seven days a week, in an effort to ease supply bottlenecks and reduce price pressures.
Ports in Los Angeles and Long Beach, California, account for 40 per cent of all shipping containers entering the US. As of Monday, there were 62 ships berthed at the two ports and 81 waiting to dock and unload, according to the Marine Exchange of Southern California.