Inflation likely remained high in September


Inflation in the United States likely remained high in September as labor and material shortages linked to the pandemic continued to push prices up.

Economists polled by the Wall Street Journal estimate that the Labor Department will report that the Consumer Price Index, which measures what consumers pay for goods and services, rose 0.3% seasonally adjusted in September from to August. It’s the same pace as in August and sharply down from June’s 0.9% pace, but wouldn’t be enough to slow inflation last month from a year ago, economists say .

Economists estimate that it grew at an annual rate of 5.3% in September from the previous year, the same pace as in August and down slightly from 5.4% in June and July, which was the highest since 2008. They predicted the core price index. , which excludes the often volatile food and energy categories, climbed 4% in September from a year earlier, the same rate as in August.

“It looks like some of these supply chain and inventory challenges are going to linger on us a bit longer, at least until the end of the year,” said Omair Sharif, founder of Inflation Insights LLC. . He said recent price pressures include firming house rents and other prices that tend to move more slowly. He also cited an expected increase in the price of health insurance, which is adjusted once a year and will first appear in last month’s inflation figures.

Rising energy prices, driven by global recovery in demand, supply disruption and geopolitical forces, could also keep prices on the rise. Consumers are already feeling it directly, as gasoline prices now average $ 3.29 per gallon, the highest level in seven years, according to the U.S. Energy Information Administration. Higher energy bills could add to the higher costs businesses currently face, increasing the pressure to pass them on to buyers.

Unusually high demand is a crucial factor in rising inflation. Spending jumped at a rate of 11.9% in the second quarter, as more people were vaccinated against Covid-19, businesses reopened and billions of dollars in federal aid flowed through the economy. Consumer spending continued to increase in August.

The labor shortage is also pushing up wages, pushing companies to raise prices. The sharp rise in restaurant prices in recent months is a sign of this shift in wages to higher prices, economists say.

Companies are grappling with scarce materials due to a combination of cranky supply chains, as well as disrupted production and high demand due to the pandemic. The sales-to-inventory ratio of retailers hit a record low in the spring and has only risen slightly since. The combination of shortages of truckers and continued consumer demand for goods has crowded ports, causing delays in deliveries of goods and driving up shipping prices.

Restaurant prices have risen sharply in recent months as a labor shortage increases wages. A restaurant in Arlington, Virginia in September.


Photo:

Jacquelyn Martin / Associated press

Many companies pass higher labor and material costs on to consumers. In September, around 46% of small businesses said they planned to raise prices over the next three months, online, according to the National Federation of Independent Businesses, a trade association, the highest since the start of the years. monthly records in 1986.

“We seem to be in a slightly different environment where maybe workers have more say in wages and companies have more say in prices charged,” said James Knightley, chief international economist at ING.

One example is the semiconductor shortage that has held back automotive production, causing prices for new and used vehicles to soar. The supply of new cars continues to be constrained by the shortage of chips, as well as a resurgence of Covid-19 infections in Asia that has resulted in the closure of factories and ports. New vehicle prices continue to rise and there are signs that used car prices are rebounding. The Manheim US wholesale used car index hit a new high in September after declining slightly over the summer.

“We seem to be in a slightly different environment where maybe workers have more say over wages and companies have more say over prices charged.”


– James Knightley, ING International Chief Economist

Federal Reserve officials are closely monitoring many inflation measures to assess whether the recent price hike will prove temporary or lasting. One of these factors is consumer expectations for future inflation, which can prove to be self-fulfilling as households are more likely to demand higher wages and accept higher prices when ‘they anticipate higher future price growth. Median three-year consumer inflation expectations rose to 4.2% in September, from 4% a month earlier, according to a New York Fed survey. The September reading was the highest since the survey began in 2013.

Fed Vice Chairman Richard Clarida said on Tuesday that the underlying inflation rate for the US economy was close to the Fed’s longer-term target of 2% and, therefore, that the recent surge would prove to be “largely transient” once the bottlenecks are resolved. However, he said the Fed would hike rates if it saw evidence that households and businesses began to expect higher inflation.

“Monetary policy would react to this,” Mr. Clarida said. “But that is not the case now.”

Higher inflation makes business planning difficult for many businesses.

Adam Lewin, who owns a Columbus, Ohio-based building supplies distribution company, began noticing the price increases in the spring. “And then it was just one after the other,” he said. His company, Hamilton Parker, sells masonry, tile, fireplaces and other construction products to consumers and other businesses, and it has quickly increased its own prices to keep pace.

Clogged ports, like Los Angeles, are driving up transportation prices.


Photo:

Frédéric J. Brown / Agence France-Presse / Getty Images

Shipping delays add to price uncertainty. Delivery times for all of the company’s products are extended. Garage doors arrive in 15 weeks when they only took two, Lewin said. With such delayed deliveries, suppliers began to raise prices on orders that had already been negotiated.

“The risk for us due to price changes is that projects could be canceled, which would impact future sales. Customer relationships can be called into question due to unforeseen price changes, and my team is under significant stress communicating these price updates, ”he said.

Prices for the services hardest hit by Covid-19 are still recovering to pre-pandemic levels, including for air travel, entertainment and recreation. The recent outbreak of the Delta variant of Covid-19 likely weakened that rebound somewhat in August, according to many economists. Conversely, as cases recede, prices for these services are likely to cause a recovery.

Write to Gwynn Guilford at [email protected]

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