WASHINGTON (AP) – Another rise in consumer prices in September pushed inflation to 5.4 percent from a year earlier, the highest level since 2008 as global supply lines Has wreaked havoc.
Consumer prices rose 0.4 percent from August to September as supply chain disruptions kept many goods short. The cost of new cars, food, gas and restaurant meals all went up.
The Labor Department said Wednesday that the annual increase in the consumer price index is consistent with the readings in June and July. Excluding the volatile food and energy categories, core inflation rose 0.2 percent in September and 4 percent from a year earlier. In June, core prices hit a three-decade high of 4.5 percent.
The unexpected spike in inflation this year reflects sharply higher food and energy prices, in addition to new and used cars, hotel rooms, clothing and furniture, and other goods and services. Covid 19 has shut down factories in Asia and slowed US port operations, anchored container ships at sea, and paid more for consumers and businesses that did not arrive in months.
“Rising prices due to increasing supply chain disruptions will keep inflation high, as the supply / demand balance is slowly settling,” said Kathy Bostjank, an economist at Oxford Economics, a consulting firm. “While we share the Fed’s view that this is not the beginning of a rise in wage prices, we see that inflation will remain steadily above 3% by mid-2022.”
Higher prices are also surpassing the salary increases that many workers can get from businesses, which have to pay more to attract employees. Average hourly wages rose 4.6 percent in September from a year earlier, a healthy increase, but not enough to keep inflation in check.
Gas prices rose 1.2 percent last month, up more than 42 percent from a year earlier. Electricity prices rose 0.8 percent from August to September.
Supply chain disruptions continue to push up new car prices, which rose 1.3 percent last month and are up 8.7 percent from a year earlier, the biggest increase in 12 months since 1980. Very
Used car prices, which rose this summer when Americans tried to buy them when they could not find new cars, fell for the second consecutive month. Clothing costs also fell 1.1 percent.
Housing costs also rose on a strong clip, with builders saying they could not find all the parts and labor they needed to build new homes as soon as possible. Rents rose 0.5 percent in September and house prices rose 0.4 percent. If maintained, the increase would put significant upward pressure on prices, as both measures account for about one-third of the CPI.
Rapid price increases have put pressure on the Federal Reserve, which has kept its benchmark interest rate at almost zero to boost further borrowing and spending. Still, inflation is well above its target of 2%. Chair Jerome Powell has repeatedly said that the price increase should be “low” next year, which will bring inflation closer to the target.
Fed Vice Chair Richard Clarida echoed that sentiment in remarks on Tuesday.
“The unwelcome rise in inflation this year, once this relative price adjustment is completed and the barriers are removed, will ultimately be largely transitional,” he said.
Atlanta Federal Reserve President Raphael Bostick joked in separate remarks on Tuesday that “temporary” is now seen as a curse in the Atlanta Fed. Bostick said the rise in prices reflects the effects of epidemics on most supply chains, adding that they should eventually be eliminated, but that this will take longer than initially expected by many Fed officials.
Rising prices also pose a threat to President Joe Biden, who is under attack from Republicans for pushing up inflation with a 1. 1.9 trillion rescue package enacted in March this year.
The White House said Wednesday it has helped push for an agreement to keep the port of Los Angeles open 24 hours a day, seven days a week, in a bid to ease supply disruptions and reduce price pressures.