Inflation rose to a 3.7 percent annual pace in September, extending a relentless climb this year pushed by surging energy prices and souring Americans on the economy as they head to the polls in three weeks.
The increase in the consumer price index, which was hotter than what economists predicted, puts even more pressure on the Trump administration and Republican candidates as one of the final economic tests before the midterm elections. Affordability is a key issue for voters in this election, and GOP candidates have been acknowledging to dissatisfied voters that economic conditions are poor, even as the Republican Party controls the White House and Congress.
President Donald Trump was elected on pledges to bring down prices for Americans, but many people have been left frustrated. Gas prices have skyrocketed this year since the United States and Israel carried out strikes on Iran, and diesel prices soared again recently as the war with Iran and the Russian war in Ukraine persist.
Trump has been trying multiple avenues to aid U.S. consumers, including exploring a diesel export ban and sending checks to millions of Americans, but he faces significant roadblocks, and many people’s concerns have not been assuaged.
The economy has consistently ranked as the leading issue for voters this election season, and the Trump administration has tried to make a last minute push to make finances more favorable for people. Democrats have seized upon voters’ dissatisfaction, pouring hundreds of millions of dollars into ads about the economy.
Gas prices, one of the most visible measures of inflation, hit above $4.30 on average this week, according to AAA, and diesel prices remained above $6.20 per gallon, near a record high. Prices for gasoline had been falling before the war with Iran began, but have surged since, exasperating Americans. And diesel prices eventually make their way into higher prices on the shelf, because the fuel is used to power everything from farming equipment to refrigerated trucks.
“That gets into the price of almost everything else,” said Diane Swonk, chief economist at KPMG.
Inflation has stayed well above the Federal Reserve’s 2 percent target for more than five years, weighing on Americans’ budgets and making people feel increasingly dreary about the economy.
The monthly consumer price index from the Labor Department is just reinforcing what people already know, that inflation remains high, said Kathy Bostjancic, chief economist at Nationwide.
“It’s like putting a little more salt in the wound,” she said.
Still, a resilient, if uninspiring, labor market with low unemployment has stabilized many households, even as wages fall behind price increases. Consumer spending remains strong, a critical piece of the economy that makes up about two-thirds of the U.S. gross domestic product.
Some households are buoyed by the strong stock market and stable employment, while others are dipping into savings or putting more money on credit cards to keep their spending up.
“People feel miserable about it, but they keep spending,” Bostjancic said.
There’s a divide between the overall economy, which is still growing at a hardy pace, and how many Americans are experiencing it, Swonk said. People have been weighed down by several years of elevated inflation and wages that haven’t kept up with price increases.
“We’ve got resilience that doesn’t resonate,” she said. “Inflation hits 100 percent of households. Everybody sees the price of gas.”
The Federal Reserve, tasked with keeping the economy growing while taming inflation, raised interest rates at its last meeting in September, and experts expect it may have to raise rates again in the near future.
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