Inflation continued to decline slightly last month but the descent from the heights continues to be painfully slow and the critical mass has set a 40-year record.
Consumer prices increased 8.2% from last yeardown from an 8.3% high in August and a 10-year high of 9.1% in June, as rising food and rent costs again offset falling gasoline prices, according to the Labor Department’s Consumer Price Index.
Economists were predicting that annual inflation would drop to 8.1%.
On a monthly basis, consumer prices rose a larger-than-expected 0.4% after a 0.1% increase in August.
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But while overall inflation is gradually softening, the key rate of price gains is at a new historic level. Average prices, which exclude food and energy items and generally provide a better measure of long-term trends, increased 0.6% from August following a similar rise last month. That pushed the annual increase from 6.3% to 6.6%, the new for 40 years.
In general, inflation for goods such as used cars and clothing is slowing, in part because supply chain problems are easing, but the cost of services, including rent and medical care, has been rising.
Economists say the document will do nothing to prevent the Federal Reserve from approving a fourth rate hike early next month to tackle inflation.
Dow Jones futures
Stock futures fell in response to the inflation news. Dow Jones futures fell 1.7% in early trading on Thursday morning.
Why are gas prices going back?
Gas prices fell sharply for a third month on lower demand for oil and weaker currencies. Pipeline prices fell 4.9% from the previous month, but were still up 18.2% on the year and rose in recent weeks after OPEC announced cuts in oil production.
Unleaded regular average $3.92 a gallon Wednesday, from $3.72 last month, according to AAA, but still down from about $5 in June.
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Will food prices continue to rise?
Grocery prices, meanwhile, rose 0.7% from August and are up 13% over the past 12 months. Prices of commodities such as wheat and corn have fallen in recent months but are still volatile due to the war between Russia and Ukraine, which has affected the region that exports these crops. Barclays expects double-digit annual food inflation until January.
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In September, the price of rice rose 1% from the previous month and 13.6% from the previous year. Cakes, cakes and cookies jumped 1.8% and are up 16% on the year. And pork is up 1.8% and 6.7% from last year.
Some of the food costs were sunk. Raw beef fell 2% and eggs fell 3.5% but are still up 30.5% on the year.
Amber Flack, 45, of Pickerington, Ohio, has seen the drop in gas prices but it hasn’t made her go back to her pre-spending habits because grocery bills continue to rise. He and his family are spending about $1,000 a month on sales, up from $600 before the price hike. They are now buying things such as canned vegetables, soda and many paper towels, saving more than 100 dollars a month.
“I don’t need to buy a lot to get the right price, but that’s what I do now,” he says.
They also drive less to save on gas, live within five miles of home and haven’t taken a vacation since before the health crisis. In the past, they took two major holidays a year.
Some price movements are mixed. Rents jumped 0.8% in the month, and 7.2% in the past year as landlords responded to the previous price of selling homes.
After a two-month slump, the stock prices resumed their upward movement, rising 0.8% and 42.9% over the past year. Medical services increased by 0.7% and 6.5% annually. And the new-car costs the highest 0.7%, and 9.4% per year.
The catalyst was the continued decline in used car prices — which fell another 1.1% — after a historic run as new car sales slowed. Clothing prices fell by 0.3% and hotel prices fell by 1%.
Inflation affects Social Security COLA increases
The impact of inflation was felt elsewhere. The government on Thursday also announced that Social Security benefits will increase by 8.7% next year – the fourth-largest increase since automatic inflation was introduced in 1975, as income increases.
The state bases its COLA adjustment on the average annual increase in the price of the city’s salaried consumers and clerical workers, from July to September. The index mainly reflects the broad CPI.
This cost-of-living adjustment, or COLA, will increase the average monthly check recipients will receive in January by $146 to $10,827, the Social Security Administration said Thursday.