It’s back: Food inflation moves in for the winter

Like a relative who shows up unexpectedly and just won’t leave, food inflation is back at the doorstep of steep rises, and, overall, inflation came in hotter than expected in September, according to new numbers released by the government late last week.

Over the last 12 months, the all-items Consumer Price Index (CPI) increased 2.4 percent before seasonal adjustment, the U.S. Bureau of Labor Statistics (BLS) announced. That was a tick higher than the 2.3-percent rise that most economists expected.

Meanwhile, the food index was racing away again, just in time to deliver more sticker shock to weary holiday shoppers. The food index increased .4 percent in September, after rising only .1 percent in August. The index for food at home also rose .4 percent in September. 

In sum, five of the six major grocery store food group indexes increased over the month, the BLS stated. The index for meats, poultry, fish, and eggs rose .8 percent in September as the index for eggs increased 8.4 percent. 

The fruits and vegetables index increased .9 percent over the month, following a .2-percent decline in August. The index for other food at home rose .2 percent in September and the index for cereals and bakery products increased .3 percent, the BLS stated. 

The dairy and related products index increased .1 percent over the month, while the nonalcoholic beverages index was unchanged in September.

The food away from home index (restaurants) rose .3 percent in September, as it did in August, the BLS observed. The index for full service meals rose .4 percent and the index for limited service meals increased .2 percent over the month.

Year-over-year, the index for food at home rose 1.3 percent over the last 12 months. The meats, poultry, fish, and eggs index rose 3.9 percent over the last 12 months and the nonalcoholic beverages index increased 1.3 percent.

Over the same period, the index for fruits and vegetables rose .7 percent and the index for other food at home increased .4 percent, the BLS stated. The dairy and related products index increased .5 percent, and the cereals and bakery products index increased .1 percent over the year.

The food away from home index rose 3.9 percent over the last year. The index for limited service meals increased 4.1 percent over the last 12 months and the index for full service meals rose 3.9 percent over the same period, the government’s data showed. 

Finally, in addition to inflation, initial jobless claims came in much higher than expected, rising by 258,000 compared to estimates of 230,000.

What’s it all about, Tyler?

Over at ZeroHedge, analyst Tyler Durden was giving the numbers some context.

For one thing, Durden pointed out, it was the 52nd consecutive month that core consumer prices rose on a month-over-month basis in September (+0.3 percent — hotter than the 0.2 percent expected) and the strongest since March. 

That left core CPI year-over-year up 3.3 percent, hotter than the 3.2 percent expected.

“The headline CPI also printed hotter than expected (+0.2 percent month-over-month vs +0.1 percent month over month expected), with the year-over-year CPI up 2.4 percent (hotter than the 2.3 percent expected but lowest since Feb 2021,” Durden wrote.

Overall, Durden stated, headline consumer prices are up more than 20 percent since the Biden-Harris administration took over, compared to around 8 percent during Trump’s first term.

Finally, he noted, the money supply was resurgent once again, suggesting the Federal Reserve’s confidence in the CPI’s decline might be misplaced.

The money supply had been shrinking since April 2022, and bottomed out in early 2023, but new numbers show it is now up 2 percent year over year. The money supply is the general measure of currency in circulation, not including money stored by the Federal Reserve.

The inflation news was not all bad. The 2.4 percent number compared to 2.5 percent for August. That means inflation growth slowed, though it was still more than economists expected.

There was good news within the numbers as well. The energy index decreased 6.8 percent for the 12 months ending September, and fell 1.9 percent in September, after declining .8 percent in August, the government stated. 

The gasoline index decreased 4.1 percent over the month, and, the BLS stated, before seasonal adjustment, gasoline prices decreased 5.1 percent in September. The gasoline index fell 15.3 percent over the 12-month span, and the fuel oil index fell 22.4 percent over that period. 

The lodging away from home index fell 1.9 percent in September, after rising 1.8 percent in August, the BLS stated. And while the medical care index increased .4 percent over the month after declining in each of the previous two months, and the index for physicians’ services increased .9 percent in September, the prescription drugs index declined .5 percent over the month.

Reaction was varied, so people could pick their poison.

There were the pessimists, such as Michael Kramer, founder of Mott Capital Management, who said inflation was hotter than expected year-over-year but that wasn’t the real shock.

“The bigger surprise was the 0.3 percent month-over-month increase in core inflation, even as shelter inflation slipped,” Kramer said. “However, the real shock of the day may have been the surge in initial jobless claims, which now seems to be driving the bond and currency markets.”

There were the middle-of-the-roaders, like Jason Furman, former deputy director of the U.S. National Economic Council, who posted on X: “Overall the same story as recently: If you believe the last six months of numbers are correct and everything before that is outdated or anomalous then we’re still in fine shape. But if some of the last six months is anomalous (in reverse) then inflation is more of a concern.”

And there were the optimists, like Lael Brainard, director of the National Economic Council for the Biden administration: “Today’s report shows inflation has fallen back down to 2.4 percent, the same rate as right before the pandemic. We keep making progress, with inflation returning to pre-pandemic levels, 16 million jobs created, lower interest rates, and low unemployment. Our economy has grown 3.2 percent per year under the Biden Harris administration — stronger than during the previous administration.”

Richard Moore is the author of “Dark State” and may be reached at richardd3d.substack.com.