Inflation jumps to 3.7% as gas and diesel prices squeeze consumers ahead of the midterms

Prices rose across broad swaths of the U.S. economy in September, as high energy costs triggered by the Iran war pushed up prices in many major consumer categories. The Bureau of Labor Statistics said Wednesday that overall prices rose 3.7% from a year ago, and 0.6% from August. Categories including housing, clothing and restaurant and take out food all saw price increases. Only three major categories saw price declines: groceries, medical care commodities and utility gas service. “The index for gasoline rose 9.1 percent in September, accounting for over half of the monthly all items increase,” the BLS said in its report. The report adds to ongoing concerns that persistent inflation is taking a toll on consumers, particularly as wage growth has been stagnant. As of September, the growth in wages was pacing at 3% on an annual basis. Paychecks have not grown faster than inflation since March. The overall increase was slightly more than had been expected by economists polled by Dow Jones, who forecast a jump to 3.6%. Core inflation, which excludes food and energy prices, also rose to 2.6% from a year ago, or 0.3% from August. This was also slightly more than had been expected. Friday’s number is the final inflation report before November’s pivotal midterm elections, in which business owners and consumers have said they will be voting with their bottom line in mind. Since August, oil prices have risen to more than $106 per barrel from about $80. The price of unleaded gas, which most consumers use, has risen 45% since late February, when the United States and Israel launched the Iran war. The price of diesel, which powers businesses, farms, the shipping industry and other critical sectors, has soared 70% over the same period. As early voting kicks off this week, the data also comes at a precarious moment for Republicans defending majorities in the House and the Senate. Polls consistently find that inflation and the high cost of living are top issues this year for voters in both parties. Stock futures fell sharply in response to the readings, as traders reassessed the potential for another Federal Reserve interest rate hike sooner than expected. Before Wednesday’s data, market odds showed that traders had expected the central bank to wait until December to raise rates. The prospect of a rate hike also helped send bond yields higher, which will in turn raise consumer borrowing costs, especially for mortgages. A Fed hike could add even more pressure to consumers, raising the cost of other forms of credit such as credit cards, personal loans and vehicle loans. The artificial intelligence boom also reared its head last month, as categories that track the price of computers, software and accessories posted record year-over-year price increases. Ahead of Wednesday’s report, economists had been watching recent price hikes on Apple products and whether they have an impact on the overall inflation figure. The smartphone category rose 0.4% month over month. Airline fares were also being closely watched, given soaring jet fuel costs. Prices in that category rose 0.2% from August, posting their smallest increase since June. Despite elevated prices and consumers who say they are being stretched to the limit, data shows that spending has remained strong. On Wednesday, Bank of America CEO Brian Moynihan said that customers continued to spend at a pace 5% higher than last year. “While much has been made of the AI boom, the consumer is still driving much” of the economy’s momentum, Citigroup CEO Jane Fraser said Tuesday.