Commerce inflation gauge shows 3.6% rise, mostly matching Labor data
The last major economic readings before the midterm elections arrived Oct. 29, and the Commerce Department’s new inflation gauge showed prices rose 3.6% in September from a year earlier, mostly matching an earlier Labor Department report for the month. Inflation remains higher than the Federal Reserve wants, and the reading helps explain why Americans remain gloomy about their personal economies as they head to the polls.
Prices are rising faster than people’s wages. Siri Steven, a resale store manager in Decorah, Iowa, said higher prices mean her family cannot put money away for emergencies. “It’s more noticeable now with, like, the price of gas going up and the price of food going up. And bills like our utilities go up. Like, everything is increasing, and wages just aren’t really increasing with that,” Steven said.
The same day, the Commerce Department reported gross domestic product, the broadest measure of the economy, grew at an annual rate of 3.4% over July, August and September. Growth came in on the higher end of what analysts predicted and marked a sharp increase from the spring, which was already pretty solid. Seeing a three at the front of GDP is a strong sign of growth, NPR’s Stephan Bisaha reported. Federal Reserve Economic Data (FRED) as of Oct. 29 placed the level of real gross domestic product at about $24.4 trillion.
Two forces sit behind the strength. The tech industry continues its massive investment into artificial intelligence — companies such as Meta are building massive data centers, which brings construction and jobs — and shoppers kept shopping, with consumer spending the biggest portion of GDP.
That growth feels delicate, according to Mark Zandi, chief economist at Moody’s Analytics. “We’re growing. The economy’s moving forward. But it’s a very, very fragile growth. It doesn’t feel like we’re kicking in on all cylinders,” Zandi said. He blames the fragility on inflation and ties it to the Trump administration’s policies on things like tariffs and the U.S. war against Iran, which he said has driven up energy prices.
The Federal Reserve held interest rates steady the day before the reports were released, after raising rates once in September to apply the brakes to the economy and slow inflation. The central bank is cautious because even a small rate hike can be painful for consumers — it often leads to rising mortgage interest rates and rising credit card rates, both already high. The Fed wants to make sure it is tapping those brakes rather than slamming them. The decision lands with the midterms right around the corner; the Fed denies that elections play any role in its decisions, but economists believe the central bank is reluctant to cause any waves right before Americans head to the polls.