September 2024 CPI Inflation Hits 2.4%, Surpassing Expectations Amid Labor Market Worries
In September 2024, the Consumer Price Index (CPI) inflation rate climbed to 2.4%, exceeding forecasts and reflecting ongoing inflationary pressures in the U.S. economy. According to the Labor Department's report, consumer prices rose by 0.2% on a seasonally adjusted basis for the month, outpacing the Dow Jones consensus by 0.1 percentage points. This marked a slight increase compared to August’s annual inflation rate, which stood at 2.5%. While inflation remains elevated, September’s reading is notable for being the lowest rate since February 2021, signaling some moderation over the longer term.
When looking at core inflation, which strips out volatile food and energy prices, we saw a monthly increase of 0.3%, with the annual core inflation rate sitting at 3.3%. This too was marginally higher than expectations, indicating that inflationary pressures have not fully subsided. Notably, much of the price increase was driven by food prices, which jumped 0.4% in September, and shelter costs, which rose by 0.2%. On the other hand, energy prices fell significantly by 1.9%, offering some relief amid the broader inflation concerns.
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Among other key sectors, used vehicle prices increased by 0.3%, while new vehicle prices rose 0.2%. Medical care services experienced a 0.7% jump, and apparel prices surged by 1.1%, contributing to the overall inflation picture. These rising costs suggest that inflation, while lower than its peak, is proving "sticky," especially in certain segments of the economy.
This CPI report comes at a critical time as the Federal Reserve continues to adjust its monetary policy. After reducing benchmark interest rates by half a percentage point in September, the central bank is expected to implement another rate cut during its upcoming meeting in November. However, the pace of these reductions remains uncertain. Despite the hotter-than-expected inflation data, futures markets have strengthened their bets on a further rate cut, with a current 86% probability of a quarter-percentage-point reduction.
One of the other key takeaways from this report is the rising concern over the labor market. Initial jobless claims surged unexpectedly, with 258,000 new filings for unemployment benefits, the highest since August 2023. Continuing claims, which track ongoing unemployment, also saw an increase, hitting 1.861 million. This development suggests that the labor market, long seen as a strength of the post-pandemic recovery, may be showing signs of weakening.
In summary, while inflation appears to be moderating slightly from its previous highs, it continues to pose a challenge, particularly in areas like food, shelter, and medical services. Coupled with rising jobless claims, these economic indicators suggest that while the Federal Reserve may be on the path of easing monetary policy, there remains uncertainty about the strength of the broader U.S. economy heading into the end of 2024.
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