Higher energy prices pushed inflation to a four-month high in September, keeping pressure on the Fed as inflation has remained above its 2% target for more than five years. Gasoline prices remained the largest driver of headline inflation, accounting for over half of the monthly increase.
On a non-seasonally adjusted basis, the Consumer Price Index (CPI) rose by 3.7% in September from a year ago, following a 3.4% increase last month, according to the BLS latest report. The “core” CPI, excluding the volatile food and energy components, increased by 2.6% over the past twelve months, following a 2.4% increase in August. The housing shelter index, which makes up a large portion of the core CPI, rose 3.2% over the year, following a 3.0% increase last month. The component index for food rose by 2.5% over the year, and the energy component index increased by 20.4%. Meanwhile, technology prices continued to climb amid strong AI demand, with price indexes for computers and software increasing 9.7% and 28.4% from a year ago.
On a monthly basis, the CPI rose by 0.6% in September (seasonally adjusted), while the “core” CPI increased by 0.3%.
The price index for a broad set of energy sources increased by 5.2% in September, as decline in natural gas (-0.3%) was offset by increases in fuel oil (+15.3%), gasoline (+9.1%) and electricity (+0.2%). Meanwhile, the food at home index fell by 0.1% and the food away from home index rose by 0.2 in September.
Outside of energy, other top contributors that rose in September included indexes for recreation (+0.5%), used cars and trucks (+0.7%), education (+0.6%), airline fares (+1.2%), medical care (+0.1%) and apparel (+0.3%). Meanwhile, the index for communication (-0.2%) was among the major indexes that decreased over the month.
The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.4% in September, following a 0.3% increase last month. The index for owners’ equivalent rent (OER) and rent of primary residence (RPR) increased by 0.3% and 0.2% over the month.
NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than core inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than core inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). In September, the Real Rent Index fell by 0.1%.
