Inflation Surges at 13-year High Amid Global Supply Chain Chaos

A customer shops for meat at a Safeway store in San Francisco, California on Oct. 4, 2021. Justin Sullivan/Getty Images

U.S. consumer prices in September accelerated at their fastest annual rate in 13 years amid a spike in energy prices and supply chain disruptions, according to figures released by the Department of Labor on Wednesday.

Data released by the agency shows the consumer price index, which measures what consumers pay for goods and services and serves as a key tracker of inflation, rose about 0.4 percent in September from August, coming after it rose 0.3 percent in August from July.

Over the past 12 months, prices increased 5.4 percent before seasonal adjustment, matching the largest year-over-year gain since 2008.

The indexes for food and shelter increase in September, contributing more than half of the “monthly all items seasonally adjusted increase,” said (pdf) the Labor Department. Last month, the index for food rose 0.9 percent, the index for food at home rose 1.2 percent, the energy index increased 1.3 percent, and the gasoline index rose 1.2 percent, according to the agency.

“The index for all items less food and energy rose 0.2 percent in September, after increasing 0.1 percent in August,” the department’s report said. “Along with the index for shelter, the indexes for new vehicles, household furnishings and operations, and motor vehicle insurance also rose in September. The indexes for airline fares, apparel, and used cars and trucks all declined over the month.”

Shortages in labor and materials coupled with shipping and supply chain challenges have driven up the costs for producers, and many of those firms have passed along those costs to consumers. That’s led to inflationary pressures that have lasted longer than some analysts, including Federal Reserve Chairman Jerome Powell, had predicted.

“Most people understand that supply chain disruptions and inventory shortages are ongoing; there’s very little few people out there forecasting that those are going to go away anytime soon ... I think they’re on target for tapering,” said Randy Frederick, the managing director of trading and derivatives for the Schwab Center for Financial Research. “This data isn’t going to change any of that. I think the thing to keep an eye on is bank earnings reports coming out this week and the [producer price index] number.”

The persistent inflation will likely continue to create headaches for President Joe Biden and his fellow Democrats as Republicans have frequently cast the blame for the price surge on his administration’s policies. Also unclear is how Biden’s federal COVID-19 vaccine mandate that would target private businesses with 100 or more employees will impact the economy and supply chain.

However, some Biden officials such as Treasury Secretary Janet Yellen believe inflation will cool off as supply chains adjust.

“I believe it’s transitory, but I don’t mean to suggest these pressures will disappear in the next month or two,” Yellen told CBS News on Tuesday night.

The Labor Department’s report comes as the International Monetary Fund (IMF) warned Tuesday about a rise in global inflation, downgrading its predictions for global economic growth to 5.9 percent in 2021 due to COVID-19-related concerns and supply chain disruptions.

“The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics. The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions,” Gita Gopinath, the head economist at the IMF, said in the report.

Reuters contributed to this report.