People shop for bread at a supermarket in Monterey Park, California on Oct. 19, 2022.<\/p>\n
Frederic J. Brown | Afp | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
Inflation was cooler than expected in October<\/a>, although household staples such as shelter, food and energy remained among the largest contributors to consumer prices still rising at a historically fast pace, the U.S. Bureau of Labor Statistics said Thursday.<\/p>\n Inflation is a measure of how quickly the prices consumers pay for a broad range of goods and services are rising.<\/p>\n The consumer price index, a key inflation barometer, jumped by 7.7% in October relative to a year earlier \u2014 the smallest 12-month increase since January. Economists expected a 7.9% annual increase<\/a>, according to Dow Jones. Basically, a basket of goods and services that cost $100 a year ago costs $107.70 today.<\/p>\n<\/div>\n The annual rate is down from June’s 9.1% pandemic-era peak and September’s 8.2% reading, but is hovering near<\/a> the highest levels since the early 1980s<\/a>.<\/p>\n “That’s obviously still very high,” said Andrew Hunter, senior U.S. economist at Capital Economics, of October’s reading. “But at least it’s a move in the right direction.”<\/p>\n A decline in the annual inflation rate doesn’t mean prices fell for goods and services; it just means prices aren’t rising as quickly.<\/p>\n More from Personal Finance:<\/strong> While the headline annual reading is generally easier for consumers to understand, the monthly change is a more accurate gauge of near-term trends, i.e., if inflation is speeding up or slowing down, economists said.<\/p>\n The CPI rose 0.4% from September, according to the BLS. Economists expected<\/a> a 0.6% monthly increase.<\/p>\n “For the past year to 18 months, we’ve seen a lot of 0.4%, 0.5%, 0.6%,” Hunter said. “It’s the reason annual inflation has been so high.”<\/p>\n Consistent monthly readings in the 0.2% range would suggest inflation was under control, he said.<\/p>\n<\/div>\n A healthy economy experiences a small degree of inflation each year. U.S. Federal Reserve officials aim to keep inflation around 2%<\/a> annually.<\/p>\n But prices started rising at an unusually fast pace starting in early 2021, following years<\/a> of low inflation.<\/p>\n As the U.S. economy reopened, a supply-demand imbalance fueled inflation that was initially limited to items such as used cars<\/a>, but which has since spread and lingered longer than many officials and economists had expected.<\/p>\n “That’s the crux of the problem: the pervasiveness of inflation,” said Greg McBride, chief financial analyst at Bankrate.<\/p>\n<\/div>\n Inflation was a top concern for voters<\/a> heading into Tuesday’s midterm elections. An NBC News poll issued last weekend found 81% of respondents were either somewhat dissatisfied or very dissatisfied with the state of the economy \u2014 a level unseen since the 2010 midterms<\/a>.<\/p>\n The typical U.S. household spends $445 more a month<\/a> to buy the same items it did a year ago, according to an estimate from Moody’s Analytics based on September’s CPI report.<\/p>\n Meanwhile, pay for many workers hasn’t kept pace with inflation, translating to a loss of purchasing power. Hourly earnings have fallen 2.8%<\/a> in the last year after accounting for inflation, according to the BLS.<\/p>\n<\/div>\n Large and consistent price increases in food<\/a>, energy and housing have been troubling, despite some recent improvement, McBride said.<\/p>\n They’re necessities that constitute a large share of household spending, making inflation “so problematic” for households, he said.<\/p>\n “You can’t go without eating, you can’t go without cooking or heating the house and you need a roof over your head,” McBride said. “Those are three categories that continue to drive these high levels of inflation.”<\/p>\n Housing represents the biggest share of average consumer budgets, accounting for 34% of household spending in 2021, according to the most recent U.S. Department of Labor data<\/a>. Transportation, which includes gasoline, and food are No. 2 and No. 3, respectively, at 16% and 12%.<\/p>\n<\/div>\n Any meaningful relief for household budgets is something that is still well over the horizon.<\/p>\n Greg McBride<\/p>\n chief financial analyst at Bankrate<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n Shelter prices increased in October, jumping 0.8% from September \u2014 the largest monthly increase in that category since August 1990, according to the BLS. The category is up 6.9% in the last year.<\/p>\n The “food at home” index \u2014 or grocery prices \u2014 jumped 12.4% in October versus the same time a year ago. That’s an improvement from 13.5% in August, which was the largest 12-month increase in more than 40 years<\/a>, since 1979.<\/p>\n The energy category \u2014 which includes gasoline, fuel oil, natural gas and electricity \u2014 was up 17.6% last month relative to October 2021. That’s a decline from September’s 19.8%.<\/p>\n “Any meaningful relief for household budgets is something that is still well over the horizon,” McBride said.<\/p>\n Gasoline prices had been a primary irritant<\/a> for many Americans earlier in the year. Prices at the pump have retreated from summer highs of more than $5 a gallon nationwide, but edged up<\/a> slightly in the past week; they currently sit at an average $3.80 per gallon, per AAA<\/a>.<\/p>\n<\/div>\n “Core” inflation \u2014 a measure that strips out food and energy costs, which can be volatile \u2014 is important in terms of predicting future inflation trends, economists said.<\/p>\n The measure gives a sense of how broad-based inflation has gotten. Core inflation was 6.6% in September, the largest 12-month increase since August 1982. Core inflation was up 6.3% in October over a year ago; the index rose 0.3% during the month versus 0.6% in September.<\/p>\n Shelter, which includes rent, was the “dominant factor” in monthly increase in “core” CPI, according to the BLS. It accounted for 40% of annual core inflation.<\/p>\n The CPI generally lags price dynamics in the broad housing market and likely isn’t an accurate present-day snapshot of shelter prices, economists said. Home sales<\/a> and mortgage volumes<\/a> have slowed significantly, leading some to declare the U.S. is in a housing recession<\/a>.<\/p>\n Other “notable” increases in the past year include medical care (up 5%), household furnishings and operations (8.4%), new vehicles (8.4%), and personal care (6.4%), the BLS said.<\/p>\n<\/div>\n Monthly increases came from shelter, motor vehicle insurance, recreation, new vehicles and personal care, according to the BLS. There were also some monthly declines: used cars and trucks, medical care, apparel and airfares, it added.<\/p>\n “Price pressures remain evident across a broad range of goods and services,” Jerome Powell, chairman of the Federal Reserve, said<\/a> during a press conference Nov. 2.<\/p>\n The central bank has been raising borrowing costs aggressively<\/a> to cool the economy and reduce inflation. Powell signaled that policy would likely continue for the foreseeable future.<\/p>\n “I would also say it’s premature to discuss pausing [interest-rate increases],” Powell said. “And it’s not something that we’re thinking about; that’s really not a conversation to be had now.”<\/p>\n “We have a ways to go.”<\/p>\n<\/div>\n Inflation isn’t a problem in just the U.S. Indeed, it’s been worse elsewhere.<\/p>\n For example, consumers in the United Kingdom saw prices increase 10.1% annually in September, tying a 40-year high hit in July<\/a>.<\/p>\n But on the global stage, inflation first showed up in the U.S., Hunter said. That’s partly due to Covid-related restrictions unwinding sooner in many states relative to the rest of the world and federal support for households kickstarting the economic recovery.<\/p>\n “The U.S. has been a leading indicator for what’s happened to inflation in other countries,” Hunter said.<\/p>\n<\/div>\n Inflation is a global problem worsened by geopolitical factors such as the ongoing Russian invasion of Ukraine. Pictured: damage in Donetsk, Ukraine, on Nov. 5, 2022, after shelling.<\/p>\n Anadolu Agency | Anadolu Agency | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n Americans had more disposable income as the economy reopened, the result of federal funds such as stimulus checks and pent-up demand from staying at home. Meanwhile, Covid-19 lockdowns roiled global supply chains \u2014 meaning ample cash ran headlong into fewer goods to buy, driving up prices.<\/p>\n Those supply-chain issues are “only now beginning to unwind,” Hunter said. But higher labor costs \u2014 the result of ongoing worker shortages and wages that have risen<\/a> near their fastest pace in decades \u2014 have led to upward pressure on the cost of services, too, he said.<\/p>\n
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Food, energy and housing are top contributors<\/h2>\n
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‘We have a ways to go’<\/h2>\n
Inflation isn’t just a U.S. phenomenon<\/h2>\n