Inflation surged more than expected in September as prices remain stubbornly high
Inflation, rising gas prices could play major role in 2022 midterms
Congressmen Bryan Steil and Jeff Van Drew evaluate how the Biden administration has handled America’s economy and energy supply on ‘The Evening Edit.’
Inflation ran hotter than expected in September, continuing to squeeze U.S. households and worsen a political headache for President Biden with just one month until midterm elections.
The Labor Department said Thursday that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 0.4% in September from the previous month. Prices climbed 8.2% on an annual basis.
Those figures were both higher than the 8.1% headline figure and 0.2% monthly increase forecast by Refinitiv economists, a worrisome sign for the Federal Reserve as it seeks to cool price gains and tame consumer demand with an aggressive interest rate hike campaign.
In an even more concerning development that suggests underlying inflationary pressures in the economy remain strong, core prices – which strip out the more volatile measurements of food and energy – climbed 0.6% in September from the previous month. From the previous year, core prices jumped 6.6%, the fastest since 1982.
SOCIAL SECURITY RECIPIENTS TO SEE BIGGEST COLA INCREASE SINCE 1981
Economists anticipated that core prices would climb 0.5% on a monthly basis and 6.5% from the previous year.
Scorching-hot inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations.
Although households continued to see some reprieve last month in the form of lower gas prices, which fell 4.9% in September from the previous month, other price gains proved persistent and stubbornly high.
The cost of groceries climbed 0.7%, putting the 12-month increase at 13.0%. Consumers paid more for items like cereal, chicken, milk and fresh vegetables.
Shelter costs, which account for about 40% of the core inflation increase, have climbed %, the fastest since February 1991.
Rent costs jumped 0.8% over the month and 6.7% on an annual basis. Rising rents are a concerning development because higher housing costs most directly and acutely affect household budgets. Another data point that measures how much homeowners would pay in equivalent rent if they had not bought their home, climbed 0.8% in September from the previous month.
"The composition of the inflation reading is perhaps even more worrisome than the overall number," said Seema Shah, the chief global strategist at Principal Asset Management. "Increases in shelter and medical care indices, the stickiest segments of the CPI basket, confirm that price pressures are extremely stubborn and will not go down without a Fed fight. What’s more, with food also a key contributor to this month’s number, it suggests household budgets may be coming under severe pressures."
Rampant inflation and the rapid dissolution of Americans' buying power have become major political liabilities for Biden ahead of the November midterm elections, in which Democrats are expected to lose their already razor-thin majorities. Surveys show that Americans see inflation as the biggest problem facing the country – and that many households blame Biden for the price spike.
The president has blamed higher prices on greedy corporations, supply chain bottlenecks and other pandemic-induced disruptions in the economy, as well as the Russian war in Ukraine. Most economists now agree that unprecedented levels of government stimulus and a stronger-than-expected recovery from the pandemic have also played at least some role in exacerbating the price spike.
The report will also have significant implications for the Federal Reserve, which has embarked on one of the fastest tightening paths in decades. Policymakers have already approved five straight rate hikes, including three back-to-back 75 basis point increases, and have shown no signs of slowing down.
Following the hotter-than-expected September inflation report, the central bank is widely expected to approve a fourth straight 75 basis point increase when policymakers next meet at the beginning of November.
This is a developing story. Please check back for updates.
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