Inflation Accelerated in September as Consumer Prices Rose 5.4% Compared to Last Year

What’s the story?

• The Bureau of Labor Statistics (BLS) on Wednesday reported that the all items consumer price index (CPI) rose by 5.4% over the last 12 months through September, which tied June and July for the largest 12-month inflation total since a 5.4% increase in the period ending in August 2008.
• Month-to-month consumer prices rose by 0.4% in September on a seasonally adjusted basis. That’s slightly faster than the 0.3% increase in August but lower than the increases of 0.5% in July, 0.9% in June (which was the largest monthly jump since a 1% spike in June 2008), and 0.6% in May. 

What goods did prices increase the most for?

• Here’s a rundown of the common items which have seen the largest increase in inflation year-over-year (notable monthly changes in parentheses):
• Fuel oil increased 42.6% over the last 12 months, including a 3.9% increase from August to September.
• Gasoline prices of all kinds increased by 42.1% over the last 12 months.
• Used cars and trucks increased 24.4% over the last 12 months, although they declined by 3.7% from August to September.
• Beef steaks increased 22.1%.
• Utility gas service (piped) increased 20.6% over the last 12 months.
• Lodging away from home increased 17.5%.
• Bacon increased 19.3%. 
• Televisions increased 12.7%.
• Eggs increased 12.6%.
• Boys’ and girls’ footwear increased 11.9%.
• Furniture and bedding increased 11.2%.
• Fresh fish and seafood increased 10.7%.
• Women’s dresses increased 9.5%.
• Moving, storage, and freight expense increased 9.4%.
• New vehicles increased 8.7%.
• Breakfast sausage increased 7.9%.
• Apples increased 7.8%.
• Chicken increased 7.6%.
• Men’s pants and shorts increased 7%.
• Peanut butter increased 6.2%.
• Electricity increased 5.2%.

What is inflation and how is it measured?

• Inflation is a measure of the decline of purchasing power for a given currency over time, which in the U.S. means that a dollar effectively buys less than it did in prior periods because prices rise.
• The most common way inflation is measured is through the Consumer Price Index for Urban Consumers (CPI-U), which shows changes in prices paid for a “representative basket of goods and services” by an urban consumer group representing about 93% of the U.S. population.
• CPI-U includes food, energy, commodities like cars and clothes, plus services such as rent and healthcare; and the relative importance of each to the overall basket shifts according to its proportion of all spending in a given month. This overall number is known as “headline” CPI, although economists also track a metric called “core” CPI which excludes food and energy because those categories tend to have more volatility.
• The Federal Reserve aims to keep inflation at about 2% as part of its dual mandate of promoting stable prices and full employment, as a modest amount of inflation is viewed as an optimum policy in terms of encouraging consumer spending without penalizing savings and investment. When inflation starts to get out of control, the Fed raises interest rates to encourage more savings and less consumer spending.

— Eric Revell

(Photo Credit: iStock.com / sefa ozel)