Case Study | Consumer prices rise above anticipation, energy costs with it

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Consumer prices rose a bit more than anticipation in September. The Labor Department on Wednesday reported that this happened following food and energy price hiked offset drop in used cars.

The consumer price index (CPI) for all products increased 0.4% for the month, in comparison to Dow Jones’ estimate of 0.3%. In terms of year-over-year, prices rose 5.4% against the approximate of 5.3% and the highest since January 1991.

On the other hand, excluding tensing food and energy prices, the CPI rose 0.2% on the month and 4% year-over-year, versus estimates of 0.3% and 4%, respectively.

Gasoline prices increased another 1.2% for the month, pushing the yearly hike to more than 42%. Fuel oil rocketed 3.9%, for a rise of 42.6% year-over-year.

Food prices also portrayed quite a remarkable gain for the month, with food at home increasing 1.2 %. Also, meat prices increased 3.3% just in September and rose 12.6% year-over-year.

Bob Doll, chief investment officer, Crossmark Global Investments, said that food and energy are dynamic; however, that is also where the problem lies. Bob also added that he wishes to start solving the supply shortage issue.

However, once everything dies down, inflation is not returning to zero to two percent, which was similar to the previous decade, said Bob.

Used car prices dropped 0.7% in the month, withdrawing the annual increase to 24.4%. Used car prices have been central to most of the inflation pressures for the past few months.

However, the continued increment in prices could offer belief to the notion that inflation is more persevering than policymakers think, although there is a decrease in vehicle costs.

Airline prices stumbled over at 6.4% in September after dropping 9.1% in July. However, shelter prices, which serve about one-third of CPI, increased 0.4% in September and reached 3.2% for the year.

In addition to that, how much the owner of a property has to pay to rent it rose to 0.4%, which is the biggest monthly gain since June 2006.

Apparel prices also slipped 1.1% for the month. On the other hand, transportation services declined by 0.5%. Both of these industries have been increasing steadily and still established notable yearly gains of 3.4% and 4.4%.

The current inflation scenario has been named “transitory” by the Federal Reserve officials. However, lately, this opinion has been receiving weighty arguments.

Doll said that the Fed is trying to convince everyone that inflation is transitory, but it is not believable. If there is anyone you know who does not live somewhere, does not eat any food, and does not use energy, then inflation may not seem like an issue, he added.

Jamie Dimon, CEO, JPMorgan Chase, took the side of “transitory,” claiming that the current situation will be clearer and inflation will not be an element in 2022.

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