Inflation cools to lowest level since February 2021

Inflation has come full circle for the Biden administration.

Consumer price growth slowed to its lowest pace since February 2021 — the first month the president took office, the Labor Department said Thursday in its final inflation report before Election Day.

The data, while a bit hotter than expected, points to an economy seeing cooler inflation even as the job market remains sturdy and interest rates ease.

The twelve-month Consumer Price Index measured 2.4% in September, slightly higher than expectations of 2.3% but down from 2.5% in August. On a month-to-month basis, the index climbed 0.2%, just above expectations for 0.1%.

Food and shelter saw outsized price growth. Grocery prices, led by meat and eggs, rose 1.3%, while the costs of food away from home climbed 3.9%. Housing costs climbed 4.9% last month from the year before. The latter helped push the "core" measure of inflation, which excludes volatile food and energy prices, up 0.3% on the month, higher than the 0.2% forecast.

Even as inflation has normalized, many households are still adjusting to prices that are more than 21% higher on average than in early 2020, with some goods and services surging even more. Pay gains, however, have more than kept pace — as they've done for roughly the last two years. Adjusted for inflation, average hourly earnings climbed 1.5% as of September from the same time a year earlier.

Those net income gains have chugged along even as consumers’ attitudes have remained relatively downbeat. A government analysis this summer found the average U.S. worker can afford the same set of goods and services as they did in 2019 — and still pocket an extra $1,400 each year.

Overall, the post-Covid U.S. economy has continued to be the envy of most industrialized nations. But there are still some signs that growth is slowing.

Following Thursday's inflation report, separate data from the Labor Department showed an uptick in jobless claims. The major stock indexes pared back gains in pre-market trading on Tursday morning, while traders upped the odds that the Federal Reserve will lower interest rates by a quarter point at its meeting next month.

Higher costs remain the top-ranked issue of concern for voters heading into November’s election. Former President Donald Trump has sought to tie Vice President and Democratic presidential candidate Kamala Harris to those price increases, accusing her of sitting by while the Biden administration approved spending he says has helped fuel the inflation boom.

But economists remain uncertain about the extent that fiscal stimulus has influenced inflation, with many saying supply chain issues and changes in consumer behavior have played an equal or greater role.