Shoppers hoping for a respite from rising inflation were again disappointed in September, as prices ballooned again, far overshooting the Federal Reserve’s target rate.
The Consumer Price Index (CPI), which measures the cost of goods and services across the United States, rose by a seasonally adjusted 0.6 percent last month and a headline 3.7 percent over the past 12 months, according to the report from the Bureau of Labor Statistics released Wednesday. Economists had projected a headline rate of 3.6 percent.
By comparison, the annual rate of inflation seen in August was 3.4 percent, while the core rate was 2.4 percent.
With mercurial energy and food costs removed from the equation, the CPI rose 0.3 percent during September and 2.6 percent from the previous 12 months, beating out economists’ projections of 0.2 percent and 2.5 percent, respectively, for the time period.
Not surprisingly, the ballooning price of oil was the driving force behind the inflationary bump as the war in Iran rages on and energy exports remain tied up in the Strait of Hormuz. On Friday, President Donald Trump made a stunning about-face in temporarily drawing down sanctions on Russian oil exports and making a deal with President Vladimir Putin to purchase over 300,000 tons of diesel in an effort to lower domestic gas prices.
The move appears a scramble on the part of the White House as the index for gasoline shot up 9.1 percent in September, accounting for more than half of the all-items increase for the month. According to the BLS, the energy index grew 5.2 percent throughout the month, far outpacing the 2.1 percent growth seen in August.
Apparel prices, too, grew 0.3 percent month over month in September, hitting an un-adjusted 3.4 percent for the previous 12 months. This, after data from Dr. Sheng Lu, professor of fashion and apparel studies at the University of Delaware, revealed that the value of apparel imports to the U.S. market rose 0.2 percent year over year in August but fell by a notable 6.3 percent in quantity. In other words, the same goods have gotten more expensive.
“With apparel and footwear prices continuing to increase over already elevated inflation rates, affordability will be on the mind of everybody who wears clothes and shoes in the United States,” American Apparel and Footwear Association president and CEO Steve Lamar told Sourcing Journal.
The leader of the Washington, D.C.-based trade organization fingered the president’s trade policy, centered on punishing duties levied against trade partners, as a key factor precipitating the heightened prices seen at retail.
“The time for meaningful tariff relief for this industry—already the most highly tariffed industry in the country—is long overdue,” he added.
Stocks fell as Wall Street took in the news on Wednesday, with the Dow Jones Industrial Average down 0.4 percent, the S&P 500 declining 1.3 percent and the Nasdaq Composite tumbling 2.01 percent as of press time, deepening losses seen Tuesday.
With consumer prices still on the rise and outpacing projections, the Federal Reserve is under pressure again to raise interest rates—a decision that could have a marked impact on the outcome of the midterm elections in November.
According to CME Fed Funds futures, there is now 47 percent chance the central bank’s Oct. 27-28 meetings could yield a decision to raise rates (up from a 22 percent chance just yesterday).
The Fed’s final meeting of the year on Dec. 9 will be another opportunity for a rate hike as it endeavors to beat back inflation to its 2 percent target rate. CME projected a 93 percent probability of at least one increase, and a 41 percent chance of two hikes, before the end of the year.