The U.S. economy received potential bad news from a higher-than-expected inflation report earlier this week. According to the Commerce Department, the rate of inflation increased substantially for the second month in a row.
The figures show that Americans spent 0.4% in higher costs in September than in August. Furthermore, this figure was the same as the high figure from the previous month.
Despite the goal of the Federal Reserve to bring inflation down to 2%, the overall personal consumption expenditure price index is up 3.4% year over year.
Furthermore, the September reading was higher than expected.
In addition, the core inflation index without food and energy prices increased by 0.3%, which is the highest rate since April. This is also significantly higher than the 0.1% found in August. Overall, the core inflation gauge was up 3.7% year over year.
The Fed hoped that the overall rate of personal consumption inflation would be lower by the end of the year, which is in doubt with the most recent report.
The negative inflation news comes after more than a year of interest rate hikes by the Fed in an effort to tamp down inflation. Home mortgage rates recently hit a more than 20-year high. Furthermore, the current Fed rates are at the highest rates since right before the Great Recession.
When Biden took office, the inflation rate was 1.4%. Now, it is more than double that at 3.7%.
Since Biden took office, prices are up by 17.7% and real wages are down by 3.2%.
— GOP (@GOP) October 27, 2023
The current efforts to fight inflation appear to be declining in effectiveness. After some reduction in the inflation rate, several recent surveys have shown inflation beginning to either tick up again or the rate staying the same.
The Fed is in a particularly difficult situation as further rate hikes could spark a recession. The number of new home starts declined to a three-year low in August.
Overall, the start of single-family houses declined by 4.3% in August, while overall housing starts fell by more than 11%. Higher interest rates and perceived negative economic data appear to be affecting the home construction rate.
Furthermore, higher prices for both labor and materials have taken their toll.
