Inflation data shows that prices in the US were still uncomfortably high last month

Minneapolis
CNN Business
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A new batch of inflation data released on Friday showed that while prices remained uncomfortably high in September, a slowdown in wage growth suggests some relief may be on the horizon. This is an encouraging development for the Federal Reserve, which is struggling to bring down the highest rate of inflation in 40 years.

The personal consumption expenditures index, which measures the prices consumers pay for goods and services, rose 0.3% from August to September but remained unchanged at 6.2% for the year, according to the latest report from the Bureau of Economic Analysis.

Core personal consumption expenditures, which strips out volatile food and energy prices and is the Fed’s preferred measure of inflation, rose 5.1% year over year, above the August 4.9% rate but below the consensus estimate of 5.2% per Refinitiv.

From August to September, the core index rose 0.5%, matching estimates. The prior month’s jump was revised down to 0.5% from 0.6%.

Separately, the Bureau of Labor Statistics released its latest employment cost index, which shows a slowdown in wage and salary growth in quarterly labor costs. The central bank is closely watching the ECI report to monitor the extent to which high inflation is raising wages – and fueling inflation.

The latest numbers come only a few days ago The Federal Reserve meets to discuss raising interest rates again – As Americans reach the polls Vote in the midterm elections.

“This data confirms that the Fed has more work to do to cool demand, lower inflation and keep policy makers on track to raise the Fed funds rate by another 75 basis points at next week’s FOMC meeting,” Gregory Dako, chief economist at EY Parthenon said. In a statement.

But some basic metrics That suggests a slowdown is on the horizon, said Mark Zandi, chief economist at Moody’s Analytics, which could mean a price increase next week – which is expected to be the fourth straight rise of 75 basis points – could be the last increase of that magnitude.

“There are a lot of moving parts, a lot of assumptions, but I think the most likely scenario is that we are in the worst of inflation and should soon be back within walking distance of the Fed. [2%] Target by spring 2024.

Consumers have been struggling for months with prices that are stuck firmly at levels not seen since the 1980s. Despite a series of massive interest rate increases from the Federal Reserve in its attempt to tame inflation, Latest Consumer Price Index – which measures the cost of everything from eggs to plane tickets – showed that price increases continued to rise and that inflation even spread from goods to services in September.

The latest personal consumption expenditures report showed that Americans continued to spend beyond their means – consumer spending increased 0.6% in September from August and income grew 0.4%, while savings levels declined.

Even when accounting for inflation, expenses exceeded income.

“Monetary policy is acting with delays, but at this early stage, consumer spending is somewhat unaffected by high inflation and price-control hikes,” Wells Fargo economists Tim Quinlan and Shannon Serry said in a note on Friday. .

However, consumers are not necessarily optimistic about the economy and its future prospects.

The University of Michigan’s Consumer Sentiment Index for October came in at 59.9, according to updated survey data released Friday. That’s just 10 points above the benchmark above the all-time low reached in June.

This month, terms of purchase of durable goods rose 23% based on price easing and supply restrictions. “However, projected business conditions for next year have worsened by 19%,” said Joan Hsu, director of surveys. “These divergent patterns reflect significant uncertainty about inflation, policy responses, and developments around the world, and consumer sentiment aligns with the upcoming downturn in the economy.”

Far from the consumer sector, Dako said, the broader economic picture is getting bleaker.

Rapidly rising interest rates, persistently high inflation and rising global uncertainty are eroding business sentiment and prompting companies to make more cautious hiring and investment decisions.

And although the housing market is already swaying under the weight Mortgage rates riseHe said the full economic impact of the Fed’s tightening has yet to be felt.

CNN Business’s Tammy Lohbe contributed to this report.