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Inflation looked less transitory in September as the global supply chain crisis pushed prices higher

Oct 29, 2021, 19:36 IST
Business Insider
Alan Diaz/ AP
  • The PCE inflation metric rose 0.3% in September, matching economists' median estimate.
  • The print showed inflation staying high into the fall and signaled price growth could stay stubbornly high.
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Prices for everyday goods in the US rose as anticipated in September, signaling uncomfortably high inflation will stick around longer than expected.

The Personal Consumption Expenditures price index - a commonly used measure of inflation - climbed 0.3% in September, the Commerce Department announced Friday. That matched the median forecast from economists surveyed by Bloomberg. The reading also shows price growth slightly slowing from the 0.4% inflation rate seen in August.

On a year-over-year basis, prices rose 4.4% last month. That matched the median estimate for a 4.4% jump.

Core PCE, which excludes volatile food and energy prices, gained 0.2% through September, also matching expectations. The print reveals core price growth decelerating from the 0.3% gain in August.

The Federal Reserve uses core PCE as its primary inflation measure as it looks to keep inflation in check. The central bank and the Biden administration had said for months that the historically high inflation would cool off as the economy healed. Yet the Friday report reveals that, while monthly price growth is down from its spring highs, it's still well above typical pre-pandemic levels.

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Inflation data from earlier in October showed similarly sticky price growth. The Consumer Price Index gained 0.4% in September, exceeding the 0.3% estimate and rebounding from the 0.3% growth seen in August. On a year-over-year basis, CPI accelerated to a 5.4% increase, marking the fastest price growth since 2008.

Together, the prints signal prices will keep soaring as the world untangles its supply chain mess. An extraordinary combination of material shortages, production bottlenecks, and shipping delays have hindered businesses' attempts to shore up supply. At the same time, the Delta wave peaked in mid-September and Americans' spending surged higher. With more cash chasing limited goods, prices had nowhere to go but up.

If pandemic-era inflation is scaring the White House, officials aren't showing it. Treasury Secretary Janet Yellen reiterated her outlook that inflation will eventually cool on Sunday, even if it lingers at elevated levels for longer than expected. Price growth will likely stay high into next year and start to cool off by the second half of 2022, Yellen said.

"We are going through a period of inflation that's higher than Americans have seen in a long time, and it's something that's obviously a concern. But we haven't lost control," she added.

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