Few signs of relief expected in September inflation data

WASHINGTON (AP) — Any Americans hoping for relief after months of punishing inflation might see little in Thursday’s government report on price hikes in September.

Lower gasoline prices will likely reduce headline consumer inflation for a third consecutive month. But measures of “core” inflation, which are closely watched because they exclude volatile food and energy costs, are expected to return to a four-decade high.

Economists estimated the government’s consumer price index jumped 8.1% in September from 12 months earlier, according to a survey by data provider FactSet. This is an extremely large gain, although less than the 9.1% year-over-year peak reached in June.

Underlying prices are estimated to have risen 0.4% from August to September, a slower pace than the previous month, but still at a much faster pace than usual before the pandemic. Measured over the past 12 months, core prices are expected to have jumped 6.5% from 6.3% in August. That’s well above the 2% inflation that the Federal Reserve has long set as its target rate.

Thursday’s report will provide final inflation figures ahead of the Nov. 8 midterm elections after a campaign season in which soaring prices across the economy fueled widespread anxiety in the public, with many Republicans blaming President Joe Biden and congressional Democrats.

Inflation has pushed up families’ grocery bills, rents and utility costs, among many other expenses, inflicting hardship on households and worsening the economy’s sluggishness despite strong job growth and historically low unemployment.

As the election approaches, Americans are increasingly taking a dim view of their finances, according to a new survey from the Associated Press-NORC Center for Public Affairs Research. Around 46% of people now describe their personal financial situation as poor, up from 37% in March. This significant drop contrasts with the mostly flat readings that have endured through the pandemic.

The September inflation report, whatever it says, is unlikely to change the Fed’s plans to maintain aggressive rate hikes in an effort to keep inflation under control. The Fed has raised its short-term policy rate by 3 percentage points since March, the fastest rate of increase since the early 1980s. The increases are aimed at raising borrowing costs for mortgages, auto loans and business loans and curbing inflation by slowing the economy.

Minutes from the Fed’s last meeting in late September showed that many policymakers have yet to see any progress in their fight against inflation. Officials have forecast that they will raise their benchmark rate by another 1.25 percentage points during their next two meetings in November and December. This would put the Fed’s key rate at its highest level in 14 years.

Along with lower gasoline prices, economists expect used car prices to fall in September after slight declines in the previous two months. Wholesale used car prices have fallen for most of this year, although the declines have yet to show up in consumer inflation data. (Used vehicle prices had skyrocketed in 2021 after factory closures and supply chain shortages reduced production.)

Major retailers have also started offering early discounts for the holiday shopping season, after racking up excess inventory of clothing, furniture and other goods earlier this year. These price cuts may have lowered inflation in September or will do so in the months to come.

Walmart said it would offer deep discounts on items including toys, homewares, electronics and beauty. Target began rolling out vacation deals earlier this month.

Yet service prices – especially rents and housing costs – remain consistently high and will likely take much longer to come down. Health care services, education, and even veterinary services continue to rise rapidly in price.

“Service price increases tend to be more persistent than goods price increases,” Federal Reserve Bank of Atlanta president Raphael Bostic noted in remarks last week.

Rising rents are a tricky issue for the Fed. Real-time data from websites such as ApartmentList suggests rents for new leases are starting to drop.

But the government measure tracks all rent payments – not just those on new leases – and most of them do not change from month to month. Economists say it could be a year or more before the drop in new leases trickles down to government data.

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