- Published
US inflation rose by more than expected in the year to September, according to official figures, in the final data release before the midterm elections next month.
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inflation → publish → elections
The pace of price rises increased to 3.7%, up from 3.4% in the 12 months to August.
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pace → increase → August
Inflation was above forecasts, driven by higher gasoline prices which have spiked following disruption to Middle East energy supplies due to the US-Israel conflict with Iran.
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which → drive → Iran
The elections are being fought over cost of living pressures across the US.
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elections → fight → US
Inflation is the rate at which the price of products or services increase over time.
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price → increase → time
For example, if a bottle of milk costs $1 but rises to $1.10 a year later, then annual inflation for bottled milk is 10%.
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inflation → cost → milk
Officials from the Bureau of Labor Statistics measure inflation through the consumer price index (CPI).
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Officials → measure → index
It tracks the price changes of hundreds of different goods and services, from groceries, to clothing, energy and medical services.
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It → track → clothing
These are things purchase for their day-to-day lives and the the Bureau of Labor Statistics uses the data to work out the overall level of inflation in the US economy.
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Bureau → purchase → economy
The bureau, which has been measuring inflation for more than 110 years, updates this so-called basket of goods over time as peoples' spending and lifestyle habits change.
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habits → measure → time
Cars and radios were not included in early data, while ice was later replaced by refridgeration in the energy section alongside fuel and electricity.
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ice → include → fuel
What causes inflation?
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What → cause → inflation
There are several factors that can cause inflation to rise.
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inflation → be → ?
If demand for a product outstrips its supply, that can lead to producers raising prices - the craze for Labubu dolls in recent years and the high resale prices are an example.
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craze → outstrip → years
Higher incomes can also lead to higher demand, for example, which in turn pushes up prices.
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which → lead → prices
Supply can also affect inflation.
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Supply → affect → inflation
If supply of a product is reduced, but demand remains constant, that will cause prices to rise.
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prices → reduce → product
A good example of this is crude oil, which is used to make gasoline and diesel.
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which → use → gasoline
Before the US-Israel war with Iran began, it was trading at just over $70 a barrel but when the conflict constricted crude supplies, the price quickly rose and is currently over $100.
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price → begin → 100
How have tariffs affected inflation?
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tariffs → affect → inflation
Since coming into office for the second time, President Donald Trump has introduced tariffs on most US trading partners around the world.
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Trump → come → world
Some of the initial tariffs announced last year were scaled back by the president as the US made trade agreements with countries.
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US → announce → countries
In February, the Supreme Court outlawed most of the remaining additional global levies.
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Court → outlaw → levies
However, the president immediately announced a new 10% global tariff to replace the ones struck down by the court.
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president → announce → court
While Trump argued the tariffs would increase America's tax earnings, boost manufacturing and encourage people to buy US-made goods, the higher import taxes have also had an impact on inflation, according to research from the Federal Reserve Bank of New York.
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taxes → argue → York
Higher tariffs - which are levies that businesses pay on the goods they import - directly raise prices for US companies unless the overseas firms they are buying from lower prices to absorb some of the cost.
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they → pay → cost
In response to the higher tariffs introduced by the president, the New York Fed found exporters reduced prices very little, meaning US-based businesses ended up absorbing nearly 90% of the cost of the added tax.
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businesses → introduce → tax
Indirectly, higher tariffs also affected the prices of locally made goods, as many US producers rely on parts, materials or ingredients from overseas.
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producers → affect → parts
Overall, the Fed found that every percentage point increase in average tariffs led to nearly a 0.25% price increase for consumer goods after one year.
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increase → find → year
While inflation is currently above where the US Federal Reserve would like - it has a target of 2% - it has been much higher in previous years.
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it → like → years
During the Covid pandemic, issues such as supply chain disruption started pushing inflation up.
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issues → start → inflation
Additionally, in early 2022 when Russia launched its full-scale invasion of Ukraine, oil prices surged over $100 a barrel.
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prices → launch → 100
Both of these factors helped to drive inflation to a peak of about 9%.
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Both → help → %
Can inflation ever go down?
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inflation → go → ?
It's important to note that if inflation is rising at a slower rate, that does not mean prices are going down - it simply means prices are rising at a slower pace.
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prices → note → pace
A bit of inflation is considered good for an economy as the the Federal Reserve's target rate illustrates.
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rate → consider → economy
Many central banks consider inflation of about 2% or a little higher to be stable, and at a level that doesn't impact people's purchasing decisions.
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that → consider → decisions
Much below that, people can delay spending if they expect prices to fall further.
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prices → delay → spending
That can lead to businesses reducing wages, or reducing the number of workers to cope with lower demand.
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businesses → lead → demand
The Aporia
