Here is the breakdown of inflation for September 2024 – in one chart

Inflation fell in September, according to the Consumer Price Index, as lower gasoline prices combined with other easing price pressures in areas such as housing eased the strain on consumers' wallets.

According to the US Bureau of Labor Statistics, the consumer price index, a key indicator of inflation, rose 2.4% last month compared to September 2023.

This figure is down from 2.5% in August, meaning price growth has slowed. It is also the smallest annual reading since February 2021.

However, the CPI reading for September was slightly higher than economists predicted.

There were some trouble spots, such as a spike in categories like clothing, car insurance and groceries. But most appear to be “one-off” increases, said Mark Zandi, chief economist at Moody's.

“The inflation trend remains very positive,” Zandi said. “This month has been a blip and I don’t think it will last.”

The CPI measures how quickly prices rise or fall for a wide range of goods and services, from car repairs to peanut butter to living room furniture.

Inflation has fallen significantly from its pandemic-era peak of 9.1% in June 2022. It is moving toward policymakers' long-term annual target of nearly 2%.

“We have made significant improvements over the last two years,” said Sarah House, senior economist at Wells Fargo Economics.

However, the slowdown in the labor market in recent months has worried economists more than inflation.

The Federal Reserve, which had raised interest rates sharply to combat high inflation from the start of 2022, began cutting last month to ease pressure on the labor market and the economy.

Food inflation was also “pretty subdued” last year, House said.

According to CPI, food prices have increased by 1.3% since September 2023.

Prices for agricultural commodities – a “key input cost” for food – have either fallen or are looking “more stable,” House said. Examples of agricultural commodities include corn, wheat, coffee and soybeans.

Wage growth has slowed, reducing labor costs for things like transporting or preparing food, House said. And grocery stores have offered more price incentives and promotions as consumers have become more cautious about their spending, she said.

However, food inflation recorded a sharp monthly increase from 0% to 0.4% in August-September.

“I don’t think it will stay that way in the future,” Zandi said.

Individual foods have their own unique supply and demand dynamics that can impact pricing.

For example, egg prices rose more than 8% from August to September and 40% since September 2023, largely due to another outbreak of bird flu, a contagious and deadly disease that affects chickens and other birds, economists said.

Housing makes up the largest share of the CPI – and has been the biggest obstacle to getting inflation back to its target level, according to economists.

“It’s a huge component,” House said. “What happens there can really be the deciding factor when it comes to headline inflation and core inflation.”

Housing CPI inflation – which includes rental prices and an equivalent measure of homeowners – has gradually declined but has remained stubbornly high. This puzzles many economists, as real estate data shows that growth in average rents for new tenants has been muted for about two years.

In September, accommodation inflation eased to 0.2% on a monthly basis from 0.5% in August.

That was one of the most encouraging signals in the latest CPI report, economists said.

“Shelter inflation is definitely easing now,” Zandi said. “And that’s such an important part of the CPI.”

Housing falls into the “services” category of the economy.

Goods inflation has largely eased from pandemic-era levels as unbalanced supply and demand dynamics ease, economists say.

But service sector inflation has “still been declining fairly slowly,” House said.

This is mainly due to the accommodation. But other categories also remain elevated.

For example, according to CPI, car insurance prices increased 1.2% from August to September and about 16% since September 2023.

Many services are “heavily dependent” on prices in other parts of the economy, House said. For example, insurers are now increasing car insurance premiums after the prices for new and used cars had previously risen sharply.

Typically, it takes a while for such dynamics on paper to trickle down to the services side, she said.

“Services inflation peaked more slowly on the way up and is also expected to decline more slowly on the way down,” she said.