Inflation increases 5.4% from a year ago, tying 13-year high

WASHINGTON (AP) – Another spike in consumer prices in September pushed inflation up 5.4% from a year ago, corresponding to the largest increase since 2008, as the lines of Tangled global supplies continue to wreak havoc.

Consumer prices in the United States were up 0.4% in September from August, as costs for new cars, food, gasoline and dining out all jumped.

Core inflation is rising

The annual increase in the consumer price index matches the June and July readings, the highest in 13 years, the Labor Department said on Wednesday. Excluding the volatile food and energy categories, core inflation rose 0.2% in September and 4% from a year ago. Basic prices hit a three-decade high of 4.5% in June.

The unexpected surge in inflation this year reflects significantly higher prices for food and energy, but also for furniture, cars, televisions and other largely imported goods. COVID-19 has closed factories in Asia and slowed down 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 resulting from persistent supply chain bottlenecks in a context of high demand will keep the inflation rate high, as imbalances between supply and demand are only gradually resolved. “said Kathy Bostjancic, economist at Oxford Economics, a consulting firm. “While we share the Fed’s view that this is not the start of an upward spiral in wages and prices, we expect inflation to remain consistently above 3% until in mid-2022. “

The latest inflation data makes it even more likely that the Fed will soon start cutting its $ 120 billion monthly bond purchases, which are aimed at keeping long-term interest rates low. Most analysts expect the Fed to announce such a move at its next meeting on November 3.

The higher prices also exceed the wage gains that many workers can get from companies, which have to pay more to attract employees. Average hourly wages rose 4.6% in September from a year earlier, a healthy increase, but not enough to keep up with inflation.

Some prices go down

A good sign in September was that prices fell or moderated in categories that had initially been pushed much higher by the pandemic. These cuts have kept basic price increases from escalating.

Used car prices fell 0.7% last month, the second consecutive drop, after costs soared over the summer as consumers, unable to find or afford a new car, instead turned to the occasion.

Costs for hotel rooms, car rentals and plane tickets have also all fallen over the past month, as the peak delta in COVID-19 cases has limited travel plans. Car rental prices had skyrocketed over the summer after many companies sold part of their rental fleets. Clothing prices fell 1.1% in September, providing some relief to consumers after increases earlier this year.

New cars, however, are getting more expensive with costs rising 1.3% in September and 8.7% from a year ago. This was the largest 12-month increase in new car prices since 1980. A semiconductor shortage restricted vehicle production and left fewer cars on dealership lots.

Home furniture prices, which suffered significant delivery delays, jumped 2.4% in September alone, the largest increase since 1988. In the past 12 months, furniture costs have climbed 11 , 2%, the highest since 1951.

The cost of footwear rose 0.5% in September and jumped 6.5% last year. Children’s shoes grew 11.9%, a record gain in data dating back to the 1950s. Most shoes are imported and are likely caught in bottlenecks.

Restaurant owners are paying higher wages to attract workers who have become elusive during the pandemic and they are paying more for food. And for the fifth month in a row, this led to outsized price hikes, 0.5%, in September. The cost of a meal at a full-service restaurant has jumped 5.2% over the past year, an unprecedented jump as long as records are kept.

Rising gas prices

Gas prices jumped 1.2% last month and are up more than 42% from a year ago. Electricity prices rose 0.8% in September from August.

Housing costs have also risen at a steady pace, as builders say they can’t find all the parts and workers they need to build new homes as quickly as they would like. Rents rose 0.5% in September and a measure of home prices climbed 0.4%. If sustained, these increases will put considerable upward pressure on prices.

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these two measures represent almost a third of the CPI.

Higher inflation has increased pressure on the Federal Reserve, which has set its benchmark interest rate near zero to stimulate more borrowing and spending. Yet inflation is well above its 2% target. President Jerome Powell has repeatedly stated that price gains are expected to “weaken” next year, bringing inflation closer to the target.

Fed Vice Chairman Richard Clarida echoed this view on Tuesday.

“The untimely surge in inflation this year, once these relative price adjustments are completed and the bottlenecks resolved, will ultimately prove to be largely transient,” he said.

Raphael Bostic, chairman of the Atlanta Federal Reserve, joked Tuesday in separate remarks that “transient” is now seen as the equivalent of a curse at the Atlanta Fed. Bostic said the price spikes primarily reflect the impact of the pandemic on supply chains and added that they are likely to fade away eventually, but that will likely take longer than many Fed officials say. had originally planned.

Price gains are also a vulnerability for President Joe Biden, who has been accused by Republicans of boosting inflation with his $ 1.9 trillion bailout passed in March of this year.

The White House said on Wednesday it helped secure an agreement to keep the Port of Los Angeles open 24 hours a day, seven days a week, in a bid to alleviate bottlenecks and reduce price pressures.

The ports of Los Angeles and Long Beach, California, account for 40% of all ocean containers entering the United States. As of Monday, there were 62 ships docked at the two ports and 81 waiting to dock and unload, according to the Marine Exchange of Southern California. .

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AP writer Josh Boak contributed to this story.

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