US consumer prices outpace forecast as inflation dogs economy

WASHINGTON • Prices paid by US consumers rose last month by more than forecast, resuming a faster pace of growth and underscoring the persistence of inflationary pressures in the economy.

The consumer price index (CPI) increased 0.4 per cent from August, according to Labour Department data released yesterday.

Compared with a year ago, the CPI rose 5.4 per cent, matching the largest annual gain since 2008. Excluding the volatile food and energy components, core inflation rose 0.2 per cent from the prior month.

A combination of unprecedented shipping challenges, materials shortages, high commodity prices and rising wages have sharply driven up costs for producers.

Many have passed some portion of those costs along to consumers, leading to more persistent inflation than many economists - including those at the Federal Reserve - had originally anticipated.

The pickup in price growth seen last month reflected higher food and shelter costs.

Meanwhile, measures of used cars and trucks, apparel and airfares cooled.

US stocks opened higher while the yield on the 10-year Treasury declined.

The median estimate in a Bloomberg survey of economists called for a 0.3 per cent monthly gain in the overall measure and a 0.2 per cent advance in the core rate.

The CPI data reflects crosscurrents in the economy. Hotel rates fell, reflecting the impact of the Delta variant on travel, but inflation is broadening out beyond categories associated with reopening.

That is "worrisome" from the Fed's perspective, Bloomberg Economics said in a note.

Higher home prices are now starting to filter through in the data.

Rents of primary residence jumped 0.5 per cent, the most since 2001, while a measure of home owners' equivalent rents posted the biggest gain in five years.

Shelter costs, which are seen as a more structural component of the CPI and make up about a third of the overall index, could prove a more durable tailwind to inflation.

The report will likely reinforce the Fed's inclination to soon start tapering its asset purchases, especially as the supply-chain challenges plaguing businesses show little signs of abating.

While wages have strengthened in recent months, higher consumer prices are eroding Americans' buying power.

Inflation-adjusted average hourly earnings rose 0.2 per cent in September from a month earlier, but are down 0.8 per cent from a year ago, separate data showed yesterday.

To help offset higher prices, more than 64 million American retirees collecting Social Security benefits will see a 5.9 per cent increase in their monthly payments next year, the Social Security Administration said yesterday.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 14, 2021, with the headline 'US consumer prices outpace forecast as inflation dogs economy'. Subscribe