AIER’s Everyday Price Index Rises 0.29 Percent in September 2023
In September 2023 the AIER Everyday Price Index (EPI) rose 0.29 percent to 288.6. This is the fourth consecutive increase in the EPI, and this increase takes our index to a new all-time high, topping last month’s record of 287.7.
AIER Everyday Price Index vs. US Consumer Price Index
(NSA, 1987 = 100)
Within the EPI, the largest monthly increases occurred in motor fuel, food away from home, gardening/lawncare services, and housing fuels and utilities. The largest declines in price were seen in prescription drugs, internet and electronic information provider services, admissions to movie theaters and concerts, and landline telephone services.
On September 13th the US Bureau of Labor Statistics (BLS) released Consumer Price Index (CPI) data for September 2023. The month-to-month headline CPI number rose 0.4 percent, beating surveys expecting a rise of 0.3 percent. The core month-to-month CPI number rose 0.3 percent, which was in line with expectations.
September 2023 US CPI headline & core month-over-month
(2013 – present)
The largest contributor to the increase in monthly headline CPI were shelter prices, which accounted for more than half of the price rise. Rising gasoline prices were also a factor. In the core CPI reading, rent, owners’ equivalent rent, lodging away from home, and motor vehicle insurance were the areas in which prices rose the most. Core prices that fell from August to September 2023 included used cars and trucks and apparel.
On a year-over-year basis, headline CPI rose 3.7 percent compared to expectations of a 3.6 percent rise. Categories accounting for the headline increase were food at home, food away from home, and gasoline prices. Natural gas prices fell. Also on a year-over-year basis, Core CPI rose 4.1 percent from September 2022 to September 2023, which met expectations. The largest determinant of the increase in the core year-over-year CPI was shelter, which rose 7.2 percent and accounts for 70 percent of the increase. Also rising over the past year were prices for motor vehicle insurance, recreation, and new vehicles.
September 2023 US CPI headline & core year-over-year
(2013 – present)
The release of last month’s FOMC meeting minutes revealed a majority of officials expressing support for one more rate hike in 2023 given the ongoing persistence of high shelter and service costs. Shortly after the release of the CPI data, Fed fund futures expressed a 43 percent chance of an additional quarter point rate hike between now and 1 January 2024.
Headline inflation in September 2023 was more favorable than in August, but core inflation (particularly in services) was not. On a one-, three-, and six-month annualized basis, September’s core CPI rose 3.9, 3.1, and 3.6 percent respectively. All are substantially higher than the Fed’s 2 percent target range and in the case of the one- and six-month annualized rates, higher than seen in August.
US labor markets are softening, but not quickly enough that upward price pressures due to consumer demand have diminished substantially. The recent outbreak of conflict in the Middle East poses an additional upside risk to inflation, as will the expansion of the United Auto Worker strikes if the disruption in auto production materially affects the supply of new cars on the market. Altogether, the visible spots of price momentum in the September CPI support the Federal Reserve’s higher-for-longer mantra, and raise the possibility that even now policy rates are insufficiently restrictive.
Peter C. Earle
Peter C. Earle, Ph.D, is a Senior Research Fellow who joined AIER in 2018. He holds a Ph.D in Economics from l’Universite d’Angers, an MA in Applied Economics from American University, an MBA (Finance), and a BS in Engineering from the United States Military Academy at West Point.
Prior to joining AIER, Dr. Earle spent over 20 years as a trader and analyst at a number of securities firms and hedge funds in the New York metropolitan area as well as engaging in extensive consulting within the cryptocurrency and gaming sectors. His research focuses on financial markets, monetary policy, macroeconomic forecasting, and problems in economic measurement. He has been quoted by the Wall Street Journal, the Financial Times, Barron’s, Bloomberg, Reuters, CNBC, Grant’s Interest Rate Observer, NPR, and in numerous other media outlets and publications.
