WASHINGTON (AP) – Another spike in consumer prices in September sent inflation hitting 5.4% year-over-year, the highest level since 2008 as tangled global supply lines continue to wreak havoc.
Consumer prices rose 0.4% in September compared to August, as supply chain disruptions led to shortages of many goods. Prices for new cars, food, gasoline, and restaurant meals soared.
Annual CPI gains were in line with those in June and July and the highest in 13 years, the Labor Department said Wednesday. Excluding volatile food and energy categories, core inflation rose 0.2% in September and 4% year over year. In June, prices for staple foods hit a three-year high of 4.5%.
The unexpected surge in inflation this year reflects sharp increases in food and energy prices, as well as new and used cars, hotel rooms, clothing and furniture, and other goods and services. COVID-19 has closed factories in Asia and slowed down ports in the United States, leaving container ships anchored at sea and paying more for goods that have not arrived for months by consumers and businesses.
“Rising prices due to continued bottlenecks in the supply chain amid strong demand will keep inflation high as supply and demand imbalances are only resolved gradually,” said Katie Bostjancic, economist at consulting firm Oxford Economics. “While we share the Fed’s view that this is not the beginning of an upward spiral in wages and prices, we expect inflation to remain stable above 3% until mid-2022.”
Higher prices also outpace the wage increases that many workers can get from businesses that have to pay more to attract employees. Average hourly wages in September rose 4.6% year-on-year, a significant increase, but not enough to keep pace with inflation.
Gas prices jumped 1.2% last month and are up more than 42% from last year. Electricity prices in September increased by 0.8% compared to August.
Supply chain disruptions continue to drive new car prices up 1.3% last month and 8.7% year over year, the largest increase in 12 months since 1980. Semiconductor shortages have limited car production and left fewer cars at dealerships. many.
Used car prices, which soared this summer as Americans tried to buy them when they couldn’t find new cars, fell for the second straight month. Clothing prices also fell 1.1%.
Housing prices have also skyrocketed as builders say they cannot find all the parts and workers they need to build new homes as quickly as they would like. In September, rents increased by 0.5%, and house prices – by 0.4%. If this growth is sustained, it will put significant upward pressure on prices, since these two indicators account for almost a third of the CPI.
The rapid rise in prices has increased pressure on the Federal Reserve, which has set its benchmark interest rate near zero to stimulate borrowing and spending. However, inflation is well above the 2% target. Chairman Jerome Powell has repeatedly stated that price increases should “decline” next year, bringing inflation closer to the target.
Fed Vice Chairman Richard Clarida echoed this view in his speech on Tuesday.
“An unwanted spike in inflation this year after relative price adjustments are completed and bottlenecks removed will ultimately prove to be largely temporary,” he said.
Rafael Bostic, president of the Atlanta Federal Reserve, joked on Tuesday in separate remarks that “interim” is now seen as the equivalent of a curse at the Atlanta Fed. Bostic said the price spikes mostly reflect the impact of the pandemic on supply chains and added that they should eventually disappear, but it will likely take longer than many Fed officials originally expected.
Price hikes are also a vulnerability for President Joe Biden, who has come under attack from Republicans for spurring inflation with his $ 1.9 trillion bailout package passed in March this year.
The White House said Wednesday it helped push for an agreement to keep the Los Angeles port open 24 hours a day, seven days a week to ease supply problems and ease price pressures.