Inflation Jumps to 3.7% as Gas Prices Surge and Paychecks Fall Behind for a Third Month
September consumer prices rose 0.6% on the month; gasoline is up 34.2% over the year and wages rose just 3%.
Consumer prices rose 0.6% in September from August, above forecasters' expectations, and 3.7% from a year earlier, up from 3.4% in August, according to the Labor Department's consumer price index released October 14. It was the last inflation report before the November 3 midterms.
Gasoline was the main driver. Pump prices rose 9.1% in September, after a 3.9% rise in August, and are up 34.2% over the year, accounting for more than half of the monthly increase. AAA puts the national average for regular at $4.33 a gallon, up from $3.08 a year ago, and diesel near $6.30. Core inflation, which excludes food and energy, rose 0.3% on the month and 2.6% from a year ago, up from 2.4% in August. Shelter rose 0.4% and airline fares rose 1.2% on the month, up 22% on the year; food at home fell 0.1% on the month but is up 1.8% over the year, and dining out is up 3.5%.
Wages did not keep pace. Average hourly earnings rose 3% over the year, so paychecks fell behind prices for the third straight month, the Spokesman-Review reports.
Economists see the war's fingerprints. Christopher Rupkey, chief economist at FWDBONDS, warned the energy price shock from the Middle East war is spreading into prices for other core goods and services. Cleveland Fed President Beth Hammack said pressures extend beyond energy, citing tariffs, AI investment, and rising services prices. White House economic adviser Kevin Hassett said the energy-driven surge is temporary and pointed to a 1.2% drop in prescription drug prices as good news.
Why it matters: at the grocery store and the pump, families are paying more than they were a year ago while earning only slightly more. Whether that is a temporary shock or a new trend will help decide how voters see the economy on November 3. The Federal Reserve meets October 28.
- Axios: Inflation heats up as gas prices surge
- Spokesman-Review: Energy, gas costs push inflation higher. Paychecks are lagging behind
Facts above are attributed to the linked reporting. Statements in a source's own opinion section are labeled as commentary. We correct errors promptly.
More from this section
Fed Weighs Another Rate Hike on Oct. 28 as Hot Inflation Report Shifts the Odds
Markets put the odds between 44% and 52%; Fed officials are divided on how much more tightening is needed.
Oil Tops $109 and Diesel Nears $6.30 as Iran War Squeezes Supply
Brent settled at $109.86 on Friday; officials argue about whether the Russia waiver or the Navy blockade will help.
Who Owns the Price Hike? Both Parties Point Fingers as Inflation Hits 3.7%
A Democrat blames Trump's war and tariffs; a White House official calls it temporary; Vance blames Biden and Iran.