US inflation pushes higher as food and energy costs rise
Headline inflation in the US rose at a faster-than-expected pace last month, official data showed on Wednesday, pushed higher by climbing food and energy prices.
According to the US Bureau of Labor Statistics, the consumer price index increased 0.4% in September on a seasonally-adjusted basis, after rising 0.3% in August. The annual rate was 5.4% before seasonal adjustments.
Both figures were higher than forecast, with economists looking for CPI of 0.3% month-on-month and 5.3% annually.
Food prices increased 0.9% in September compared to 0.4% on August. The food-at-home index was 1.2% higher, with all six major grocery store food group indices rising. The energy index, meanwhile, increased 1.3%.
Once the more volatile elements of food and energy are stripped out, however, month-on-month core CPI rose 0.2%, below expectations for a 0.3% rise, while the annual rate met forecasts at 4.0%.
Oxford Economics said: "Price increases stemming from ongoing supply chain bottlenecks amid strong demand will keep the rate of inflation elevated as supply-demand imbalances are only gradually resolved.
"While we share the Federal Reserve’s view that this isn’t the start of an upward wage price spiral, we look for inflation to remain persistently above 3% through mid-2022. Thus the Fed remains on course to commence quantitative easing tapering next month and to start rate lift-off by year-end 2022."
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The core appears comforting, but it is flattered by a second straight plunge in airline fares, down 6.4% after a 9.1% plunge in August. This is the impact of the Delta Covid wave, which reduced passenger numbers. The hit is now fading, and we expect fares to rebound strongly in the fourth quarter, perhaps as soon as October.
"In short, we are not willing yet to assume that the trend in the core CPI can be sustained at the benign 0.22% average for the past three months. The fading of the Delta wave is very likely to trigger a clear rebound in the Covid-sensitive components, and we are worried about the vehicle and rent components.
"Today’s core numbers look good, but the next few months could easily see a run of 0.3% increases or more."