U.S. Inflation Up 5.4 Percent, Highest Rate Since 2008, as Supply Chain Issues Persist

The U.S. inflation rate is up 5.4 percent from where it was a year ago, the highest rate shift since 2008, as global supply chain issues persist, pushing consumer prices higher, the Associated Press reported.

The Labor Department said Wednesday that the annual increase in the consumer price index was the highest in 13 years, matching the readings in June and July. Core inflation rose 0.2 percent in September and 4 percent compared with a year ago, when excluding the volatile food and energy categories. Core prices hit a 30-year high of 4.5 percent in June.

Economist Kathy Bostjanicic at the consulting firm Oxford Economics said it's expected that inflation will remain high due to global supply chain complications into next year.

"Price increases stemming from ongoing supply chain bottlenecks amid strong demand will keep the rate of inflation elevated, as supply/demand imbalances are only gradually resolved," Bostjancic said.

"While we share the Fed's view that this isn't the start of an upward wage-price spiral, we look for inflation to remain persistently above 3 percent through mid-2022."

For more reporting from the Associated Press, see below.

Global Supply Delays
Surging inflation and supply chain disruptions are hampering global economic recovery, with the U.S. inflation rate up 5.4 percent from last year. Above, a cargo ship filled with containers moves through New York Harbor as it heads out to the Atlantic Ocean on October 12, 2021, in New York City. Spencer Platt/Getty Images

The unexpected burst of inflation this year reflects sharply higher prices for food and energy, but also for furniture, cars, televisions, and other largely imported goods. COVID-19 has shut down factories in Asia and slowed U.S. port operations, leaving container ships anchored at sea and consumers and businesses paying more for goods that may not arrive for months.

The latest inflationary data makes it even more likely that the Fed will soon begin reducing its $120 billion a month in bond purchases, which are intended to keep longer-term interest rates low. Most analysts expect the Fed to announce such a move at its next meeting November 3.

Higher prices are also outstripping the pay gains many workers are able to obtain from businesses, which are having to pay more to attract employees. Average hourly wages rose 4.6 percent in September from a year earlier, a healthy increase, but not enough to keep up with inflation.

One good sign in September was that prices fell or moderated in categories that had been initially pushed much higher by the pandemic. Those declines kept core price increases from worsening.

The costs for hotel rooms, car rentals, and airline tickets also all fell last month, as the Delta spike in COVID-19 cases limited travel plans. Car rental prices had shot up over the summer after many companies sold portions of their rental fleets. Clothing prices fell 1.1 percent in September, providing consumers some relief after increases earlier this year.

Prices for household furniture, which has faced major shipping delays, jumped 2.4 percent in September alone, the biggest increase since 1988. Over the past 12 months, furniture costs have soared 11.2 percent, the most since 1951.

The cost of shoes rose 0.5 percent in September and have jumped 6.5 percent in the past year. Children's shoes are up 11.9 percent, a record-high gain in data that stretches back to the 1950s. Most shoes are imported and are likely caught in supply bottlenecks.

Gas prices jumped 1.2 percent last month and have soared more than 42 percent compared with a year ago. Electricity prices rose 0.8 percent in September from August.

Higher inflation has raised pressure on the Federal Reserve, which has pegged its benchmark interest rate at nearly zero to spur more borrowing and spending. Yet inflation is far above its target of 2 percent. Chair Jerome Powell has repeatedly said that the price gains should "abate" next year, bringing inflation closer to the target.

Fed Vice Chair Richard Clarida echoed that view in remarks Tuesday.

"The unwelcome surge in inflation this year, once these relative price adjustments are complete and bottlenecks have unclogged, will in the end prove to be largely transitory," he said.

Raphael Bostic, president of the Atlanta Federal Reserve, joked Tuesday in separate remarks that "transitory" is now seen as the equivalent of a curse word at the Atlanta Fed. Bostic said that the price spikes mostly reflect the pandemic's impact on supply chains and added they should eventually fade, but it will likely take longer than many Fed officials initially expected.

The price gains are also a vulnerability for President Joe Biden, who has been accused by Republicans for spurring inflation with his $1.9 trillion rescue package enacted in March of this year.

The White House said Wednesday that it has helped foster an agreement to keep the Port of Los Angeles open 24 hours a day, seven days a week, in an effort to ease supply bottlenecks and reduce price pressures.

Ports in Los Angeles and Long Beach, California, account for 40 percent of all shipping containers entering the U.S. As of Monday, there were 62 ships berthed at the two ports and 81 waiting to dock and unload, according to the Marine Exchange of Southern California.

Consumer Price Increase
Consumer prices rose 0.4 percent last month, slightly higher than August’s gain and pushing annual inflation to the highest increase in 13 years. Above, a consumer shops at a retail store in Morton Grove, Illinois, on July 21, 2021. Nam Y. Huh/AP Photo