Inflation is hotter than expected, as prices rise by 5.4 per cent


Inflation continued to rise in September, with the Fed saying on Wednesday that companies were facing a shortage of supply and nationwide labor shortages as prices rose higher than expected.

The Labor Department’s Consumer Price Index, which measures the basket of goods and services and energy and food costs, jumped 5.4 percent in September from a year ago.

This is a year-over-year increase of 5.3 per cent in August and a 5.4 per cent rise in June and July, the largest increase in 12 months since August 2008, before the financial crisis sent the US into the biggest recession. Seen after the Great Depression.

Consumer prices rose 0.4 percent from August, the Labor Department said.

Economists surveyed by the Dow Jones forecast a 5.3 per cent year-over-year increase in September and a monthly increase of 0.3 per cent.

The core consumer price index, which excludes volatile food and energy costs, rose 4 percent from a year ago, up from 4 percent year-on-year in August.

As countries emerge from the epidemic, the supply chain around the world is struggling to keep up with the whip surge in demand for goods.
Spencer Platt / Getty Images

That measure of inflation has eased since rising 4.5 percent in June, indicating an acceleration of tracking prices since 1991.

Most of the increase this summer has come from the epidemic, particularly from the damaged sectors and the high demand for used car prices, airline prices and fuel costs.

The volatility in the prices of those commodities is central to the Federal Reserve’s argument that the latest flare in inflation is temporary and is not a reason to use the government’s bond-buying program as a boon to the stock market.

Inflation
Economists surveyed by the Dow Jones forecast a 5.3 per cent year-over-year increase in September and a monthly increase of 0.3 per cent.
Justin Sullivan / Getty Images

In recent months, Fed officials have acknowledged that inflation may be longer-lasting than previously thought because corporate executives have warned that they may have to continue raising prices to make a profit, perhaps for next year.

Economists say some factors are driving up prices.

A shortage of workers across the country, including transportation, retail, hospitality and others, has forced the company to increase wages, then the costs are passed on to consumers.

And as the world’s surrounding supply chain struggles to keep up with the rising demand for goods, countries emerge from the epidemic, leading to a shortage of various goods affecting almost all industries.

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