WASHINGTON–The Consumer Price Index for All Urban Consumers increased 0.4% in September on a seasonally adjusted basis after rising 0.3% in August, the U.S. Bureau of Labor Statistics reported, and two credit union economists have now weighed in with views on what the data mean.
Over the last 12 months, the all items index increased 5.4% before seasonal adjustment, according to the Bureau of Labor Statistics.
“Inflation remained high in September, as expected, due to continued supply disruptions and labor shortages,” said CUNA Senior Economist Dawit Kebede. “The imbalances between demand and supply that have been driving price increases hasn't changed after a slight indication of slowing down in August.
“The small monthly change for September is not surprising considering the impact of Delta in recent months, and may not bring a change in the calculus of the Federal Reserve's monetary policy response,” continued Kebede.
According to the federal data, the indexes for food and shelter rose in September and together contributed more than half of the monthly all items seasonally adjusted increase. The index for food rose 0.9%, with the index for food at home increasing 1.2%. The energy index increased 1.3%, with the gasoline index rising 1.2%.
Additional Data Points
The index for all items less food and energy rose 0.2% in September, after increasing 0.1% in August. Along with the index for shelter, the indexes for new vehicles, household furnishings and operations, and motor vehicle insurance also rose in September. The indexes for airline fares, apparel, and used cars and trucks all declined over the month.
In addition, the government reported the all items index rose 5.4% for the 12 months ending September, compared to a 5.3% rise for the period ending August. The index for all items less food and energy rose 4.0% over the last 12 months, the same increase as the period ending August. The energy index rose 24.8% over the last 12 months, and the food index increased 4.6% over that period.
NAFCU Analysis
Meanwhile, NAFCU Chief Economist and Vice President of the Research Curt Long said the data has led to both worries and some good news.
“This is slightly faster than last month, but still much lower than the pace since February,” said Long. “Prices dropped for airfare (-6.4%), apparel (-1.1%), and used cars and trucks (-0.7%) after rapid increases earlier this summer. Supply chains woes are still causing ripple effects that are driving up prices and limiting supply. West Coast ports recently announced that longshoremen will begin working around the clock to unload ships stuck in port.
“Large retailers are committing to increase their efforts to clear ports as well, as worries mount that inventory shortages will hamstring the holiday shopping season,” Long continued. “The Fed remains adamant that inflation will cool over time and inflationary pressures will abate as supply bottle necks ease, but housing costs will be key. Rental Prices grew at their fastest pace since 2006 and seem sure to rise further. A rate hike appears unlikely until the latter half of next year, but the Fed’s resolve will be tested by elevated inflation readings that will last at least through the middle of 2022.”
Tapering of Assets
“The FOMC is committed to announce that it will begin tapering asset purchases at its November meeting,” Long added. “That process should wind down in mid-2022, at which point the path will be clear for a rate hike. NAFCU expects liftoff to occur in the fourth quarter of next year.”