Here’s the inflation breakdown for October 2022 — in one chart
People shop for bread at a supermarket in Monterey Park, California on Oct. 19, 2022.
Frederic J. Brown | Afp | Getty Images
Inflation was cooler than expected in October, although household staples such as shelter, food and energy remained among the largest contributors to consumer prices still rising at a historically fast pace, the U.S. Bureau of Labor Statistics said Thursday.
Inflation is a measure of how quickly the prices consumers pay for a broad range of goods and services are rising.
The consumer price index, a key inflation barometer, jumped by 7.7% in October relative to a year earlier — the smallest 12-month increase since January. Economists expected a 7.9% annual increase, according to Dow Jones. Basically, a basket of goods and services that cost $100 a year ago costs $107.70 today.
The annual rate is down from June’s 9.1% pandemic-era peak and September’s 8.2% reading, but is hovering near the highest levels since the early 1980s.
“That’s obviously still very high,” said Andrew Hunter, senior U.S. economist at Capital Economics, of October’s reading. “But at least it’s a move in the right direction.”
A decline in the annual inflation rate doesn’t mean prices fell for goods and services; it just means prices aren’t rising as quickly.
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While the headline annual reading is generally easier for consumers to understand, the monthly change is a more accurate gauge of near-term trends, i.e., if inflation is speeding up or slowing down, economists said.
The CPI rose 0.4% from September, according to the BLS. Economists expected a 0.6% monthly increase.
“For the past year to 18 months, we’ve seen a lot of 0.4%, 0.5%, 0.6%,” Hunter said. “It’s the reason annual inflation has been so high.”
Consistent monthly readings in the 0.2% range would suggest inflation was under control, he said.
The ‘pervasiveness’ of price increases
A healthy economy experiences a small degree of inflation each year. U.S. Federal Reserve officials aim to keep inflation around 2% annually.
But prices started rising at an unusually fast pace starting in early 2021, following years of low inflation.
As the U.S. economy reopened, a supply-demand imbalance fueled inflation that was initially limited to items such as used cars, but which has since spread and lingered longer than many officials and economists had expected.
“That’s the crux of the problem: the pervasiveness of inflation,” said Greg McBride, chief financial analyst at Bankrate.
Inflation was a top concern for voters heading into Tuesday’s midterm elections. An NBC News poll issued last weekend found 81% of respondents were either somewhat dissatisfied or very dissatisfied with the state of the economy — a level unseen since the 2010 midterms.
The typical U.S. household spends $445 more a month to buy the same items it did a year ago, according to an estimate from Moody’s Analytics based on September’s CPI report.
Meanwhile, pay for many workers hasn’t kept pace with inflation, translating to a loss of purchasing power. Hourly earnings have fallen 2.8% in the last year after accounting for inflation, according to the BLS.
Food, energy and housing are top contributors
Large and consistent price increases in food, energy and housing have been troubling, despite some recent improvement, McBride said.
They’re necessities that constitute a large share of household spending, making inflation “so problematic” for households, he said.
“You can’t go without eating, you can’t go without cooking or heating the house and you need a roof over your head,” McBride said. “Those are three categories that continue to drive these high levels of inflation.”
Housing represents the biggest share of average consumer budgets, accounting for 34% of household spending in 2021, according to the most recent U.S. Department of Labor data. Transportation, which includes gasoline, and food are No. 2 and No. 3, respectively, at 16% and 12%.
Any meaningful relief for household budgets is something that is still well over the horizon.
Greg McBride
chief financial analyst at Bankrate
Shelter prices increased in October, jumping 0.8% from September — the largest monthly increase in that category since August 1990, according to the BLS. The category is up 6.9% in the last year.
The “food at home” index — or grocery prices — jumped 12.4% in October versus the same time a year ago. That’s an improvement from 13.5% in August, which was the largest 12-month increase in more than 40 years, since 1979.
The energy category — which includes gasoline, fuel oil, natural gas and electricity — was up 17.6% last month relative to October 2021. That’s a decline from September’s 19.8%.
“Any meaningful relief for household budgets is something that is still well over the horizon,” McBride said.
Gasoline prices had been a primary irritant for many Americans earlier in the year. Prices at the pump have retreated from summer highs of more than $5 a gallon nationwide, but edged up slightly in the past week; they currently sit at an average $3.80 per gallon, per AAA.
‘We have a ways to go’
“Core” inflation — a measure that strips out food and energy costs, which can be volatile — is important in terms of predicting future inflation trends, economists said.
The measure gives a sense of how broad-based inflation has gotten. Core inflation was 6.6% in September, the largest 12-month increase since August 1982. Core inflation was up 6.3% in October over a year ago; the index rose 0.3% during the month versus 0.6% in September.
Shelter, which includes rent, was the “dominant factor” in monthly increase in “core” CPI, according to the BLS. It accounted for 40% of annual core inflation.
The CPI generally lags price dynamics in the broad housing market and likely isn’t an accurate present-day snapshot of shelter prices, economists said. Home sales and mortgage volumes have slowed significantly, leading some to declare the U.S. is in a housing recession.
Other “notable” increases in the past year include medical care (up 5%), household furnishings and operations (8.4%), new vehicles (8.4%), and personal care (6.4%), the BLS said.
Monthly increases came from shelter, motor vehicle insurance, recreation, new vehicles and personal care, according to the BLS. There were also some monthly declines: used cars and trucks, medical care, apparel and airfares, it added.
“Price pressures remain evident across a broad range of goods and services,” Jerome Powell, chairman of the Federal Reserve, said during a press conference Nov. 2.
The central bank has been raising borrowing costs aggressively to cool the economy and reduce inflation. Powell signaled that policy would likely continue for the foreseeable future.
“I would also say it’s premature to discuss pausing [interest-rate increases],” Powell said. “And it’s not something that we’re thinking about; that’s really not a conversation to be had now.”
“We have a ways to go.”
Inflation isn’t just a U.S. phenomenon
Inflation isn’t a problem in just the U.S. Indeed, it’s been worse elsewhere.
For example, consumers in the United Kingdom saw prices increase 10.1% annually in September, tying a 40-year high hit in July.
But on the global stage, inflation first showed up in the U.S., Hunter said. That’s partly due to Covid-related restrictions unwinding sooner in many states relative to the rest of the world and federal support for households kickstarting the economic recovery.
“The U.S. has been a leading indicator for what’s happened to inflation in other countries,” Hunter said.
Inflation is a global problem worsened by geopolitical factors such as the ongoing Russian invasion of Ukraine. Pictured: damage in Donetsk, Ukraine, on Nov. 5, 2022, after shelling.
Anadolu Agency | Anadolu Agency | Getty Images
Americans had more disposable income as the economy reopened, the result of federal funds such as stimulus checks and pent-up demand from staying at home. Meanwhile, Covid-19 lockdowns roiled global supply chains — meaning ample cash ran headlong into fewer goods to buy, driving up prices.
Those supply-chain issues are “only now beginning to unwind,” Hunter said. But higher labor costs — the result of ongoing worker shortages and wages that have risen near their fastest pace in decades — have led to upward pressure on the cost of services, too, he said.
Russia’s invasion of Ukraine also fueled a surge in commodity prices — for crude oil and grain, for example — which has fed into higher costs for gasoline and food, Hunter added.
High energy costs have broad ripple effects on other goods, which become more costly to produce and transport.
“I think this is something that will likely take much of 2023 to unfold, if we’re lucky,” McBride said.
Leading electric vehicle analyst, author, and industry thought leaders Loren McDonald and Bill Ferro stop by Quick Charge to discuss EV Adoption’s acquisition by Paren, the “crisis” of EV charging reliability, and the real state of the EV market.
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Chevy EV owners in Texas who have Reliant as their electric utility can now charge for free at night with renewable energy.
Over 150 Chevrolet dealerships across Texas are now offering the Reliant Free Charge Nights plan to new EV buyers. With Free Charge Nights, customers can offset their charging costs by receiving credits for electricity used between 11 pm and 6 am. The plan is powered entirely by renewable energy, thanks to the purchase of renewable energy certificates (RECs).
Rasesh Patel, president of NRG Consumer, says the plan is about making power personal: “We’re excited to help Chevrolet EV drivers offset the cost of charging their vehicle all while having access to a renewable electricity plan.”
This collaboration aims to make EV adoption more appealing by making charging cheaper and greener. GM Energy’s chief revenue officer, Aseem Kapur, emphasized that partnerships like this help build the ecosystem needed to support an all-electric future: “The Reliant Free Charge Nights plan is a great example of how an automaker and an energy company can work together to make EV adoption an easy decision.”
Existing Reliant customers can also sign up for the Free Charge Nights plan. To get started, Chevrolet EV owners need to designate their vehicle on the GM Energy Smart Charging Portal before enrolling in the plan.
Reliant Energy, a subsidiary of NRG Energy, serves over 1.5 million customers in Texas, making it one of the largest electricity providers in the state.
Read more: Texas to get 1 GW AI-powered virtual power plant, enough to power 200,000 homes
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Texas is about to get a major power boost – a new AI-powered virtual power plant (VPP) delivering capacity equivalent to 200,000 homes during peak demand.
NRG Energy is teaming up with Renew Home to bring nearly 1 gigawatt (GW) of capacity to the Texas grid by 2035, aiming to make it more resilient while helping residents save on energy costs.
The new VPP will rely on hundreds of thousands of smart thermostats and other connected home devices, making use of AI technology provided by Google Cloud. These devices, like Vivint and Nest smart thermostats, will be offered to eligible customers at no cost. By automating HVAC adjustments, they help shift energy use to when electricity is cheaper, cleaner, and less strained.
NRG and Renew Home have big plans for the VPP. Starting in spring 2025, the companies plan to roll out the program across Texas, installing these smart thermostats in homes served by NRG’s retail electricity providers. Eventually, they plan to add home battery storage and EVs to expand the power plant’s capabilities.
Texas has faced record-breaking energy demands, with peak usage hitting 85 GW in 2023. As the state’s population grows and extreme weather becomes more frequent, VPPs like this one could play a key role in stabilizing the grid. VPPs aggregate a lot of small-scale energy resources, from smart thermostats to home batteries, and use them to help balance supply and demand during times of high stress on the grid.
This nearly 1 GW VPP will be one of the largest of its kind in Texas. NRG’s president of consumer operations, Rasesh Patel, calls it a “pivotal step” for improving customer experience while making Texas’ energy infrastructure more sustainable and resilient.
In addition to Renew Home, NRG is working with Google Cloud to maximize the power plant’s effectiveness. Google Cloud’s AI and analytics tools will help predict weather conditions, forecast renewable generation, and optimize energy usage, all of which will help make energy management smoother for both customers and the grid.
Ben Brown, CEO of Renew Home, said:
NRG’s commitment to creating a more resilient and sustainable energy future while also making electricity bills more affordable makes them an ideal partner for co-developing this unique VPP program.
This initiative raises the bar for future-proofing our electricity infrastructure and delivering cost savings to customers.
Read: Chinese solar giant Trina sells its Texas factory a week after it opens
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Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisers to help you every step of the way. Get started here. –trusted affiliate link*
FTC: We use income earning auto affiliate links. More.
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