September Consumer Price Index: What to Watch

Consumer Price Index data from the Labor Department will likely show that prices continued to climb quickly in September.

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Consumer prices are still rising fast, and a problem for Washington and Wall Street.

Container ships at the Port of Savannah last month. Factory shutdowns, clogged shipping routes and labor shortages have combined to make goods difficult to produce and transport.Credit…Erin Schaff/The New York Times

Oct. 13, 2021, 5:20 a.m. ET

The White House and the Federal Reserve are watching inflation data nervously, hoping that rapid price gains will fade soon but increasingly admitting that the cool-down is taking longer to materialize than they had expected earlier this year.

A key reading of consumer prices due on Wednesday is unlikely to ease their minds.

The Consumer Price Index probably climbed by 5.3 percent in September compared with the prior year, according to a Bloomberg survey of economists. From August to September, the index likely rose 0.3 percent.

While monthly gains have slowed from their breakneck pace earlier this year — they popped by as much as 0.9 percent this summer — they are still abnormally rapid. And price pressures are not fading as rapidly as policymakers had hoped.

Inflation jumped early in 2021 as prices for airfares, restaurant meals and apparel recovered after slumping as the economy locked down during the depths of the pandemic. That was expected. But more recently, prices have continued to climb as supply shortages mean businesses can’t keep up with fast-rising demand. Factory shutdowns, clogged shipping routes and labor shortages at ports and along trucking lines have combined to make goods difficult to produce and transport.

The snarls show no obvious signs of easing, and while Fed officials still think inflation will fade, they are increasingly concerned that supply disruptions could last long enough to prompt consumers and businesses to expect higher prices. If people believe that their lifestyles will cost more, they may demand higher compensation — and as employers lift pay, they may charge more for their goods to cover the costs, setting off an upward spiral.

Already, companies are raising wages to lure back employees who left the job market during the pandemic and have yet to return, and landlords are raising rents rapidly. Both factors could feed into inflation in the months ahead — and unlike pandemic-tied quirks that should eventually resolve themselves, higher wages and housing costs could become a more persistent source of price pressures.

Fed officials have signaled that they would use the central bank’s policies to control inflation if it proves persistent — but they would prefer to leave borrowing costs at low levels until the job market is more fully healed. Those potentially conflicting goals could set the stage for a tense 2022.

Wall Street is watching every fresh inflation data print closely, because higher rates from the Fed could dent growth and stock prices.

And the White House is under pressure to come up with whatever fixes it can. Later on Wednesday, President Biden is expected to address the supply-chain problems — which are weighing on his approval ratings as they push prices higher.

The Labor Department will release the C.P.I. at 8:30 a.m. in Washington. Here’s what to watch:

Headline inflation is expected to climb by 5.3 percent from the prior year, matching the C.P.I.’s year-over-year increase in August. Core inflation, which strips out food and fuel prices, is expected to climb 4 percent.

Policymakers are likely to emphasize month-over-month data, since a lot of the pop in the yearly data comes from increases that happened in cars and other categories this summer. While monthly gains are decelerating, a 0.3 percent gain would translate into a roughly 3.6 percent increase if it persisted all year. Better, but still quick.

Also important is “Owner’s Equivalent Rent,” a rent-tied price gauge that accounts for about 24 percent of the overall index. It’s been moving up, and if it accelerates further, could be a source of stickier inflation.

New vehicle and used car and truck prices could again play a big role. Both were big contributors to inflation this summer. Used car prices had started to cool off, but more real-time data suggest that is changing.

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