Inflation continued to surge in September, with prices rising more than expected as companies grapple with a snarled supply chain and a nationwide labor shortage, the feds said Wednesday.
The Labor Department’s Consumer Price Index, which measures a basket of goods and services as well as energy and food costs, jumped 5.4 percent in September from a year earlier.
That’s up from August’s 5.3 percent year-over-year rise in prices and matches the 5.4 percent increases seen in June and July, the biggest 12-month rise since August 2008, just before the financial crisis sent the US into the worst recession it had seen since the Great Depression.
Consumer prices rose 0.4 percent from August, the Labor Department said.
Economists surveyed by Dow Jones expected a 5.3 percent year-over-year spike in September and a monthly increase of 0.3 percent.
“Wednesday’s still elevated Consumer Price Index marks about 6-months worth of hot inflation data, suggesting that inflation is not as transitory as many investors previously expected,” said Nancy Davis, founder of Quadratic Capital Management.
Wednesday’s inflation report comes just as third-quarter earnings season begins, she noted, adding that “investors will be looking to see if inflation is starting to negatively affect corporate profits in a significant way.”
The core consumer price index, which excludes volatile food and energy costs, rose 4 percent from a year ago, matching the 4 percent year-over-year jump that the index saw in August.
That measure of inflation has eased since it spiked 4.5 percent in June, marking the fastest acceleration of prices it tracks since 1991.
Much of the price increases are due to “continued supply disruptions and labor shortages,” Credit Union National Association senior economist Dawit Kebede said.
“The imbalances between demand and supply that have been driving price increases hasn’t changed after a slight indication of slowing down in August.”
Much of the increases this summer have been from sectors that were hit particularly hard by the pandemic and have since snapped back to high demand, such as used car prices, airfares and fuel costs.
“The indexes for airline fares, apparel, and used cars and trucks all declined over the month,” the feds said Wednesday in a press release, adding though that the prices for new vehicles, household furnishings and other goods rose for the month.
Gasoline prices, for example, climbed another 1.2 percent in September, from August. Costs at the pump are now up more than 42 percent compared with a year ago.
And the closely watched used car prices fell 0.7 percent for the month, but costs are still up more than 24 percent from a year ago.
Air fares saw a major drop in September, perhaps reflecting a drop in demand at the start of the month due to the late summer surge in COVID-19 cases. Prices tumbled 6.4 percent from a month earlier after falling 9.1 percent in August.
In a worrying sign, though, food prices jumped 1.2 percent in September after rising 0.6 percent in August.
“The index for nonalcoholic beverages increased 1.2 percent in September, its fourth consecutive monthly increase,” the feds said. “The index for fruits and vegetables rose 0.6 percent in September, a larger increase than the 0.2-percent increase reported in August.”
Prices in grocery stores are now up 4.5 percent compared with a year ago, the feds said, and “all of the six major grocery store food group indexes increased over the period.”
“The largest increase was the index for meats, poultry, fish, and eggs, which increased 10.5 percent as the index for beef rose 17.6 percent over the year,” the feds said in their release.
Last month, the White House accused the country’s biggest meat processors of profiteering by charging higher prices during the pandemic. But the industry fired back that costs are rising throughout the industry and they need to hike prices to keep a profit.
Anu Gaggar, global investment strategist for Commonwealth Financial Network, noted that “the rate of price increases has slowed down from the torrid pace of spring and summer.”
“Some of the transitory components are already moderating, such as airlines, apparels, and used autos,” she added.
Volatility in prices of those goods has been central to the Federal Reserve’s argument that the recent flare-up in inflation is temporary and not a reason to taper the government’s bond-buying program that’s been a boon to the stock market.
In recent months, though, Fed officials have acknowledged that inflation may be longer-lasting than previously thought as corporate executives warn that they’re going to have to continue to hike prices to make a profit, perhaps into next year.
A few factors have been driving prices higher, economists say.
The nationwide shortage of workers across various industries, including transportation, retail, hospitality and others, has forced companies to hike wages, a cost that then gets passed on to customers.
And the world’s roiled supply chain is struggling to keep up with the whiplash spike in demand for goods as countries emerge from the pandemic, leading to shortages of various goods that’s impacting nearly all industries.
“Disruptions due to supply chains not being able to keep up with the spike in demand may take longer but will eventually be fixed,” Commonwealth’s Gaggar said. “However, higher rents and wages could prove to be stickier and eat into corporate margins.”
