The consumer price index, the top measure for inflation in the U.S., slowed in September to 2.4% in the 12-month period ending last month, according to the Bureau of Labor Statistics who released the updated consumer price index on Thursday.
The new data shows that inflation is now below recent norms. In the last decade, prices generally increase at a rate of 3.2% per year. In the last 20 years, consumer inflation has generally increased 3% annually.
The consumer price index weighs the costs of goods based on their importance. Items like food, shelter and energy tend to be weighted more heavily.
After annual inflation reached 9% in the middle of 2022, the Federal Reserve implemented a series of interest rate hikes in 2022 and 2023 to combat high inflation. Federal Reserve Chair Jerome Powell has stated the Federal Reserve's goal is to reduce inflation to an annualized rate of 2%.
As the rate of inflation has fallen in the last year, the Federal Reserve instituted a drop in federal interest rates last month.
Americans regaining lost buying power
With wages outpacing the inflation rate, Americans are regaining some of the buying power lost in 2021-2023.
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Average hourly wages increased 13 cents in September to $35.36. Workers are making an average of $1.35 an hour more than a year ago. Average weekly wages were $1,209 in September, up from $1,169 a year ago. The 3.4% increase in wages is outpacing inflation.
From January 2021 through August 2023, the price of goods and services increased 16.6%. During that same time, incomes only increased 11%. This meant that someone earning an average salary in January 2021 would have needed $9,901in pay increases to keep up with inflation. Instead, the average worker only had $6,346 in pay increases.
But in the last year, the average worker has regained about $600 of the buying power lost.
What has led to falling inflation
Grocery prices also aren't increasing as much as they have in the past. Prices for food meant to be consumed at home increased by a mere 1.3% over the last year. From June 2021 through June 2022, grocery prices increased 12.2%, according to the consumer price index.
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In the last decade, consumers generally have seen a 2.7% per year increase in grocery prices.
Energy costs have actually declined in the last year, with consumers paying 6.8% less in September 2024 as compared to September 2023.
Shelter prices have steadily increased, however. The cost of shelter in the U.S. rose 4.9% in the last year, data showed.
