Gasoline accounted for more than half of the monthly price increase, but costs also rose across other categories as workers’ purchasing power weakened.
For Craig Underwood, a farmer in Fillmore, California, rising diesel costs have become a daily concern. Speaking to PBS NewsHour about the latest inflation report, he described thinking about the expense when he wakes up and when he goes to bed.
His experience offers a glimpse of the pressure that higher fuel prices can put on people whose work depends on transportation. But September’s inflation report points to a broader problem: gasoline was a major driver of rising prices, yet it was not the only category getting more expensive.
The Consumer Price Index, or CPI, rose 0.6% from August and 3.7% over the previous 12 months, up from 3.4% in August, according to the U.S. Bureau of Labor Statistics. The monthly increase was the largest in five months.
Gasoline prices rose 9.1% in September, accounting for more than half of the overall monthly increase in consumer prices. Over the year, gasoline prices climbed 34.2%, while fuel oil prices surged 74.2%.
The increases came amid disruptions to global energy supplies associated with the war in Iran. Higher fuel costs can affect drivers directly and raise operating expenses for businesses that depend on trucks, machinery and other energy-intensive transportation.
But economist Heather Long, vice president and chief economist at Navy Federal Credit Union, told PBS that the breadth of September’s increases was especially concerning.
“Half of it is coming from the high gas and diesel prices,” Long said. “But, honestly, the reason most people gasped today when they saw this data is because the other half is coming from everything else.”
The Labor Department reported monthly increases in airline fares, medical care, apparel, recreation, education and used vehicles. Airline fares were also up 22.4% over the previous year.
Long argued that the increases in categories such as dental care, clothing, toys and automobile repairs could not all be explained by the war’s impact on energy supplies. Her concern was that inflation had become more widespread and could take longer to ease.
There were exceptions. The overall food index was unchanged in September, while food-at-home prices fell 0.1%. Restaurant and other food-away-from-home prices rose 0.2%. That uneven pattern matters because households experience inflation differently depending on what they buy.
Core inflation raises another concern
Core inflation excludes food and energy prices, which can fluctuate sharply. Economists monitor it to assess whether price pressures are spreading beyond those more volatile categories.
Core CPI rose 0.3% in September and 2.6% over the year, up from 2.4% in August, according to the Labor Department.
Long said the figures suggested inflation was more than a gasoline and oil problem and could be harder to bring down than expected.
That is her assessment, not a guarantee of what prices will do next. The data establish that prices rose across several categories; they do not establish how long those increases will continue.
The inflation report becomes more consequential when compared with wages.
Average hourly earnings rose 3.0% over the year through September, while consumer prices increased 3.7%. After adjusting for inflation, real average hourly earnings fell 0.7% over the year and 0.5% from August to September, according to the Bureau of Labor Statistics’ real earnings report.
In practical terms, workers’ pay was not buying as much as it had a year earlier on average. Even when a paycheck grows in dollar terms, faster price increases can leave less purchasing power for groceries, transportation, health care and other expenses.
Borrowing costs add another challenge for people hoping to buy a home or refinance. Mortgage rates were elevated in October, although reported averages vary by source and loan type.
For California families already facing high housing and transportation costs, the national figures offer economic context, not a precise measure of what each household pays. The CPI report does not isolate Latino households or provide a Los Angeles-specific inflation rate.
On another article we wrote about why California’s economy can grow while families continue to struggle with the cost of living. The latest national figures add another question to that broader affordability picture: whether earnings can keep pace with the cost of maintaining a household.
What could the Federal Reserve do next?
Higher interest rates can slow borrowing and spending, potentially reducing demand and easing some price pressures. But they cannot directly resolve a disruption to global oil supplies.
Long argued that the Federal Reserve would need to raise interest rates again. That remains her forecast, not an announced decision by policymakers. San Francisco Fed President Mary Daly has also said further increases may be needed, while indicating they are not urgent.
The Fed’s next scheduled policy meeting is Oct. 27-28. Its decision will depend on how policymakers weigh inflation against the risks of slowing economic activity.
For consumers, the key question is whether price increases will broaden further and how long pay will continue to lag behind them. The September report shows why the issue extends beyond the cost of filling a tank: when prices rise faster than earnings, households have less purchasing power to cover everyday needs and build financial security.
