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Inflation Watch: Inflation Rises to 3.7% in September, Driven by Energy Costs

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Updated 4 Hours Ago

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Inflation is a hot topic of conversation. The past few years, consumers have been digging even deeper into their pockets for everything from groceries and car insurance to rent and mortgage payments.

Prices rose 3.7% over the 12 months ending in September, up from 3.4% in August, according to the monthly Consumer Price Index released by the U.S. Bureau of Labor Statistics. Month to month, the Consumer Price Index for All Urban Consumers (CPI-U) increased in September by 0.6% after increasing in 0.4% in August.

The biggest driver of the leap was energy: Gas prices spiked, rising 9.1% month over month in September, compared to 3.9% in August. The index for gasoline rose 34.2% annually in September.

Although there’s no promise of an easy solution for combatting every aspect of inflation, the tool economists and savvy penny hoarders alike use for watching its ebb and flow can be explained along with what it means for the average person and how it changed this month.

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What is the CPI?

If you’ve never heard of it, the Consumer Price Index is a monthly report released by the U.S. Bureau of Labor Statistics. It provides a snapshot of critical areas of inflation as they relate to what people buy on a regular basis.

“The CPI covers basic goods we need, like food and energy, plus other items we spend money on, especially services that involve labor costs, like home repairs and personal care,” said Joe Camberato, CEO of NationalBusinessCapital.com. “When the CPI goes up, especially in areas like dining out and services, it means our expenses are increasing, which can affect how much we can buy with our money.”

So how does the BLS get this information?

Each month, the BLS gathers a sample of data from 75 urban locations across the country. It includes 80,000 price quotes from some 22,000 retail and service providers and 6,000 housing units. The data isn’t perfect and notably leaves out numbers from more rural locations. However, the BLS estimates these numbers reflect pricing increases and decreases for 93% of the U.S. population in categories like food, housing, energy and medical care.

Why Does the CPI Matter?

The CPI is a useful tool for understanding what aspects of daily expenses are getting more (or less) expensive. It can come in handy when trying to optimize budgets, investments and saving strategies.

“Consumers can use the CPI to determine and plan for how their cost of living is going to change over time,” said Cliff Ambrose, founder and wealth manager at Apex Wealth. “By tracking CPI trends, they can adjust their budgets accordingly and anticipate changes in expenses for essentials like housing, groceries and health care.”

Understanding the CPI won’t just help with budgeting. It also may provide clues as to how and where to invest discretionary income.

“If CPI reports indicate rising inflation, consumers may consider investing in assets that typically outperform during inflationary periods, such as real estate, commodities or Treasury Inflation-Protected Securities (TIPS),” Ambrose said. “Additionally, they may want to negotiate fixed-rate contracts or consider refinancing debt to lock in lower interest rates.”

Now, let’s dive into this month’s CPI report.

What Went Up:

Each month, the CPI report reflects data gathered from the previous month. The latest CPI report, which came out in October, reflects survey results for September. Here’s what went up:

The CPI as a whole increased in September: The Consumer Price Index for All Urban Consumers (CPI-U) increased in September by 0.6%.
Housing: The index for shelter continued to rise in September, increasing by 0.4%. This is part of a bigger trend: The shelter index rose 3.2% over the last year and reflects expenses for homeowners and renters alike.
Transportation services: The transportation services index increased by 0.6% in September.
Commodities: Excluding the volatile food and energy categories, prices rose 0.3%.
New vehicles: Went up by 0.2%.
Used vehicles: That increased by 0.7%.
Energy: The energy index as a whole increased by 20.4% year over year and 5.2% month over month. Fuel oil prices rose 15.3% month over month in September, compared to 10.1% in August. That’s after a monthly decline in July of 1.7%.
Apparel: the index for clothing went up 0.3% in September.
Medical care services: This went up by 0.3% after going down by 0.2% in August.
Energy services: Ticked up slightly month to month at 0.1% — annually is increased by 4.6%.
Food away from home: The cost of dining out increased by 0.2% in September.

What Went Down:

Here are the categories of the CPI that have gone down in the past month:

Food at home: Went down by 0.1%.
Medical care commodities: Decreased by 0.7%.
Utility piped gas: Saw a decrease of 0.3%.

Other notable decreases: The motor vehicle insurance index fell by 0.8% in August.

What Stayed the Same

Food: The index as a whole stayed the same.

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What This Means For You:

Here are some insights into facing inflation fluctuations this month.

Housing: Housing has been steadily rising all year for homeowners and renters. What this means: Put aside more money for your housing costs, especially if you have an adjustable-rate mortgage or plan on taking on a new mortgage or renewing your lease soon.
Food: Even with varied month to month changes, food has become increasingly more expensive over the past year — it’s gone up 2.5% over the past 12 months. What this means: Be picky with how you grocery shop and when and where you dine out.
Apparel: This index has gone up 3.4% year over year. This means buying clothes might be out of the budget for some. What this means: Try buying used or avoiding impulse buys altogether.