Hopes that inflation would continue to slow in September were dashed Thursday morning with the release of the latest consumer price index, which showed hotter-than-expected price gains.
The headline number increased 0.4 percent from August, and 8.2 percent over the last 12 months. Core inflation, which cuts out volatile food and energy prices, jumped 0.6 percent.
Wall Street was anticipating a headline increase of 0.2 percent and a core increase of 0.4 percent. The miss sent stocks plummeting, with the S&P 500 falling to its lowest point since 2020.
The increase comes despite a series of massive Federal Reserve rate hikes, which continue to send shockwaves through the global economy while making minimal progress in lowering prices.
Still, the headline year-over-year number continues to decline, coming down from 8.3 percent in August and a peak of 9.1 percent in June — even as the rate remains near a 40-year high.
The report reinforces the narrative that price gains continue to spread beyond the handful of durable goods, such as used cars, that fueled inflation through much of 2021.
“The worst fears are playing out as inflation spreads," said David Russell, vice president of market intelligence at TradeStation Group. "It started in goods and is now firmly established in services like healthcare and food away from home. Price increases are spreading like coronavirus in early 2020 with cases popping up across the country."
Here are the categories of products that are rising the most:
- Food prices were up 0.8 percent, the same as in August.
- Medical care services jumped a full percentage point, on top of the 0.8 percent rise in August.
- The cost of shelter went up 0.7 percent, also the same as in August.
Here are some items that actually fell in September:
- The price of energy declined 2.1 percent.
- Apparel fell 0.3 percent, after increasing in August.
- Used cars and trucks fell 1.1 percent.
- Gasoline continued its decline, dropping 4.9 percent
Looking more closely at energy, it's clear another shift is underway.
While gasoline prices skyrocketed over the summer, now electricity is getting more expensive. The index for natural gas increased 2.9 percent, following a 3.5 percent jump in August, while the index for electricity moved up 0.4 percent, following a 1.5 percent jump in August. In addition, the price of piped gas increased 2.9 percent, following a 3.5 percent jump in August.
The uptick in home energy costs tracks with a recent prediction from the U.S. Energy Information Agency that this winter will bring costlier utility bills.
"We expect that most U.S. households will spend more money on energy this winter than last winter, according to our latest Winter Fuels Outlook (released October 2022)," the agency wrote in a news brief. "We primarily forecast an increase in household energy expenditures this winter because we expect higher retail energy prices and a slightly colder winter."
Odds and Ends
After two straight months of price declines over the summer, airline fares ticked up 0.8 percent. This lines up with industry estimates that flight prices will surge ahead of the holidays in the hopes of avoiding the kinds of service disruptions and delays that plagued airlines this summer.
Meanwhile, you might have noticed that your salad fixings are getting pricier. Lettuce saw a month-over-month gain of 6.8 percent amid production shortages in California's Central Valley. At the same time, the cost of salad dressing was up 2.4 percent.
Other produce gains: The price of apples jumped 5 percent; potatoes increased 3.5 percent; canned vegetables were up 2.3 percent, and frozen vegetables were up 3.8 percent.
Finally, window coverings saw one of the biggest declines in the index at minus 3.4 percent, so now might be the time to go pick up those new curtains.