Americans Feel the Pain of war
The short version
- Prices rose 0.6% in September and 3.7% over the past year, up from 3.4% in August.
- Energy drove the jump: gasoline is up 34.2% and fuel oil 74.2% from a year ago.
- Core inflation is 2.6%, still above the Fed's 2% goal, and real wages are falling.
The Bureau of Labor Statistics released the Consumer Price Index for September. Overall prices rose 0.6% from August, for a 3.7% increase over the past year.
Inflation is speeding up. The one-year rate was 3.4% just a month ago, and energy and food drove the acceleration.
Energy is doing most of the damage
Overall energy prices are up 20.4% from a year ago, and drilling down into the category raises some serious concerns. The war on Iran and the bottleneck in the Strait of Hormuz have pushed gas and fuel prices up sharply.
Food is up 2.5%, with food away from home up 3.5%.
Is this just gas prices?
Core inflation, the less volatile measure that strips out food and energy, was up 2.6%. That's above the Federal Reserve's 2% goal, so some of the pressure is coming from outside the gas station too.
Real wages are falling
Real wages tumbled. What your paycheck can actually buy after inflation is down 0.68% on an annualized basis.
So if you drive to work every day or heat your home with fuel oil, you're probably feeling this report more than the 3.7% headline suggests. And if your pay went up less than 3.7% over the past year, your paycheck buys less than it did.
For the classroom and your conversations
- Did your pay go up by more or less than 3.7% this year? Subtract 3.7% from your raise (zero if you didn't get one) to see what happened to your buying power.
- Gas is up 34.2% but restaurant meals are up 3.5%. Which one do you think comes back down first, and why?
- Where in your own budget have you noticed prices going up the most?
- Why would the Fed pay more attention to core inflation when gas and groceries are what people actually notice?
Tell me where you're feeling higher prices right now.