Here is the inflation breakdown for September 2022 – in a graph
Inflation was a bit higher than expected in September, with monthly gains driven mainly by housing, food and medical care, the U.S. Bureau of Labor Statistics said Thursday.
Inflation measures how quickly the prices consumers pay for a wide range of goods and services increase.
The consumer price index, a key barometer of inflation, jumped 8.2% in September from a year earlier. Economists were expecting an annual increase of 8.1%. Basically, a basket of goods that cost $100 a year ago costs $108.20 today.
The good news: September’s annual rise was lower than August’s 8.3% rise. The bad: Inflation is still high in many consumer categories, said Yiming Ma, an assistant professor of commerce at Columbia University.
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“On paper, [inflation] went down,” Ma said. “The elephant in the room is that price levels continue to rise at an extremely high rate.”
“The big picture is that inflation is high everywhere,” she added. “I think consumers will continue to feel that.”
Food prices have taken a ‘prominent role’
Food prices have been among the categories that have contributed the most to inflation in recent months.
The “food at home” index – or grocery store prices – jumped 13% in September from the same period a year ago. That’s down slightly from 13.5% in August, which was the biggest 12-month rise in more than 40 years, since March 1979.
Within this category, some items have seen their prices rise sharply over the past year, such as butter and margarine (+32.2%), eggs (+30.5%) and flour (+24. .2%).
Gasoline prices were the biggest irritant for many U.S. households earlier this year, when national averages briefly topped $5 a gallon, but food has now “played that primary role,” Mark said. Hamrick, senior economic analyst at Bankrate.
Still, energy prices have been another major contributor to inflation over the past year. The category — which includes gasoline, fuel oil, electricity and other items — is up 19.8%.
Gasoline prices have retreated from summer highs and currently average $3.91 per gallon nationally, per AAA. But the prices are expected to rise after a bloc of major oil producers announced plans to cut oil production last week.
More inflation contributors than detractors
“Core” inflation – a measure that excludes food and energy costs, which can be volatile – is important for predicting future inflation trends, according to Andrew Hunter, senior US economist at Capital Economics.
The measure gives an idea of the evolution of generalized inflation. That base rate rose 6.6% last year, from 6.3% in August and the largest 12-month increase since August 1982, according to the Bureau of Labor Statistics.
“The problem is that there are more contributors to inflation than there are detractors right now,” Hamrick said. “It’s not a localized problem.”
Housing, which includes rent, has risen 6.6% over the past year and accounts for more than 40% of the total increase in core inflation. Increases in medical care (+6%), home furnishings and operations (9.3%), new vehicles (9.4%) and used cars and trucks (7.2%) are other “notable” categories, according to the Bureau of Labor Statistics.
Inflation factors are ‘remarkable, unprecedented and very complicated’
A healthy economy experiences a low level of inflation each year. US Federal Reserve officials aim to keep inflation around 2%.
But an imbalance between supply and demand caused inflation to rise from the start of 2021, after years of low inflation.
Covid-19 lockdowns, stimulus funds and other factors have combined to crimp global supply lines, shift Americans’ consumption of goods and services and fuel a rise in job openings and wages , according to Hamrick. The war in Ukraine has also created supply bottlenecks and pushed up global prices for commodities such as oil and food, he said.
“The convergence of all of these factors has been remarkable, unprecedented and very complicated,” Hamrick said.
Inflation is on the rise in global economies. Global inflation is expected to rise from 4.7% in 2021 to 8.8% in 2022, but decline to 6.5% in 2023 and 4.1% by 2024, according to the International Monetary Fund.
Despite signs of continued high CPI inflation, “there are still clear signs of disinflation everywhere else,” according to a note released Thursday morning by Capital Economics.
These signs include a fall in used car prices, which “should continue to trickle down”, and private sector measures on new rents, which “also point to a possible strong moderation in housing inflation”, says Note. However, a slowdown in rent inflation is unlikely to be pronounced until the first half of 2023, he added.
“I think it will sort itself out, but it will take patience,” Hamrick said.