Since affordability is allegedly the top issue in this year's midterms, the release of updated inflation data 20 days before the Election Day was going to be a big deal. Especially since we knew gas prices rose for September, and it was only a question of how much inflation went up.
Here was the answer.
Inflation heated up to 3.7% annually last month as energy prices soared, according to the latest Consumer Price Index data.
The latest reading came in hot, accelerating from 3.4% in August and outpacing economists' expected 3.6% jump. On a monthly basis, prices rose 0.6% in September from 0.4% a month earlier.
Gas prices were a particularly large driver of the jump, rising 9.1% month over month. Average prices at the pump hit a record $4.33 last month, according to AAA data, nearly $0.50 above the previous monthly record set in 2023...
"Core" inflation, which strips out volatile food and energy prices and is watched more closely by Federal Reserve officials, was also hotter than expected, rising 2.6% annually, up from 2.4% in August. Monthly core inflation was unchanged from August's hotter-than-anticipated 0.3% but also came in higher than the 0.2% economists were expecting.
None of that seems good, and it continues the run of the highest year-over-year inflation we've had since early 2023.
Dig into the actual report, and it looks like it could have been even worse than the topline numbers indicated. That 0.6% increase in overall prices came in a month where grocery prices allegedly dropped for the second time in the last 3 months (-0.1%), with beef and veal (-1.0%) and dairy products (-0.9%) leading the way. Take out the food index (both with groceries and at restaurants), and everything else went up by 0.7%.
Worse is that the 0.6% overall price increase happened in the same month where there was a paltry increase in average hourly wages of 0.1%. Which means inflation-adjusted wages fell by 0.5%, and continued a slide that started this time last year, and got worse after the US started bombing Iran at the end of February 2026.
And I think that leads to an interesting contrast between the bout of higher inflation we had in 2021 and 2022 vs what we're dealing with today. Real wages fell in both circumstances, but 2021 and 2022 came on the heels of a huge increase in real hourly wages for those who were still working in 2020, those who didn't got high unemployment benefits, and there were stimulus checks on top of it. And wage increases were still running at 5%-6% throughout 2021 and 2022 on top of the gains in 2020.
By comparison, year-over-year increases in average hourly wages have slowly dwindled since the end of 2022. And wage increases have continued to go down even as inflation has rebounded in 2026.
As important as the CPI number was today, I'm even more interested in what the Producer Price Index tells us tomorrow, as that'll tell us if the record diesel prices are starting to be pushed into cost increases in the making of other products. Then those price increases will likely be passed ahead in future months to consumers.
We also will have the release of retail sales for September, which will tell us if the higher gas prices combined with near-zero wage increases from last month caused consumers to slow spending on other items. Americans haven't slowed down yet, and it's allowed the overall economy to keep growing with limited layoffs to date. But with debt costs rising with the prices, you gotta think some Americans pull the plug soon.
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