Consumer prices tame in September

Consumer prices stagnated in September as energy prices dropped and food prices climbed.
Tobias Burns/MEDILL

By Tobias Burns

Consumer prices in the U.S. inched slightly higher in September, suggesting that inflation is under control and perhaps running at a level that is too low for comfort amid signs of a global economic slowdown.

The consumer price index, which measures the price of everything from coffee to automobiles, rose a seasonally adjusted 0.1 percent, with a bump in food, shelter and household goods just barely offsetting a dip in energy prices, The U.S. Department of Labor said Wednesday. 

So-called core consumer prices, which exclude the traditionally unstable food and energy categories, also rose 0.1 percent in September, in line with expectations. Consumer prices rose 1.7 percent from a year ago for a second straight month, well below the Federal Reserve’s inflation target. 

“We got a tame U.S. inflation reading in September,” said Jennifer Lee, senior economist at BMO Financial Group. “The core measure remains below the Fed’s 2 percent watch.”

One of the lone bright spots for September was the cost of shelter, which was up 0.3 percent for the month and 3 percent from a year earlier, a significant increase.

Energy prices dropped 0.7 percent, which was weaker than expected, according to J.P. Morgan economist Zima Saijid. Many analysts are pinning the decrease on decelerating demand for fuel oil, as well as an oversupply of gasoline and lackluster demand from China and Europe. Analysts say that OPEC’s refusal cut production has also contributed to sagging worldwide prices.

Despite some concern that inflation may be too low, Diane Swonk, chief economist at Mesirow Financial, said she still expects the Fed to end the central bank’s bond-buying program following next week’s Federal Open Market Committee meeting.

“Economic conditions may be strong enough to end the Fed’s large-scale asset purchases program,” Swonk wrote in a blog post. “The Fed will need to see some warming in the overall economy, however, before actually raising interest rates.”

Unimpressive GDP growth in China, which is now at its slowest pace in five years, is further contributing to concerns about a global slowdown.