WASHINGTON — Americans paid sharply higher prices for goods and services in September, the government said Tuesday, mainly because of the elevated cost of gas.
The consumer price index jumped 0.6 percent in September for the second month in a row, the Labor Department said Tuesday. That’s the biggest back-to-back increase in more than four years.
Economists surveyed by MarketWatch forecast CPI to rise by 0.5 percent.
Higher prices in the past two months have hit Americans in the pocketbooks. Inflation-adjusted wages dropped 0.3 percent in September and 0.6 percent in August, wiping out any improvement in workers’ earnings in the past year. Real wages have fallen 0.2 percent in the past 12 months.
The decline in inflation-adjusted wages, however, has not deterred Americans from spending. Even after accounting for higher gas prices, retail spending in September rose sharply, the government reported Monday.
Meanwhile, people who collect Social Security can expect a 1.7 percent increase in their monthly payments on Jan. 1, based on the latest inflation figures. Annual cost-of-living adjustments are calculated by the increase in a related index, known as CPI-W, from September of the current year to the same month in the prior year.
The cost of gas has been the biggest driver of consumer prices in the past two months. Higher gas prices accounted for 70 percent of the increase in CPI in September and about 80 percent in August.
As a result, energy prices surged 4.5 percent in September after a 5.6 percent increase in August. The cost of natural gas, electricity and fuel oil also rose last month.
In the past 12 months, energy prices have risen 2.3 percent. Food prices, meanwhile, edged up 0.1 percent last month. In the past year, food prices have risen 1.6 percent.
Some economists think food prices might rise a bit faster in coming months, the offshoot of a severe summer drought in much of the U.S. that damaged crops and limited farm yields.
Higher prices of gas and food are not a welcome trend for an economy trying to shake off its latest bout of lethargy. When consumers have to devote more of their budget to basic staples, they have less to spend on other goods and services, growth of which is critical to an expanding economy.
If gas prices decline, as they often do following the summer driving months, consumers could get a bit of relief. That would increase their real wages again and give them more cushion to spend as the holiday season approaches.
Excluding food and gas, core consumer prices rose a much smaller 0.1 percent in September. Core CPI is viewed by the Federal Reserve as a better barometer of long-term inflationary trends because food and energy costs can jump sharply from month to month.
The price of gasoline aside, the cost of most goods rose at a modest pace. The prices of used autos, however, tumbled 1.4 percent, the biggest decline in more than three years. Dealers offered discounts to move last year’s models as new vehicles hit the market.
In the past 12 months, consumer prices have risen an unadjusted 2 percent, up from 1.7 percent in August. The core rate has also increased 2.0 percent in the past 12 months.
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