U.S. inflation further cooled in September, but there’s a catch

Two of Americans’ biggest expenses—food and shelter—are still getting more expensive
By Sam Bourgi
•
11 October 2024
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U.S. consumer prices continued to cool in September, though stubborn food and shelter inflation prevented Americans from catching a break.

According to the Bureau of Labor Statistics (BLS), the headline Consumer Price Index (CPI) rose 0.2% from August and 2.4% compared to a year earlier. Both figures were slightly above expectations.

Core inflation, which excludes volatile food and energy costs, increased 0.3% during the month and 3.3% compared to a year earlier.

Food prices accelerated 0.4% during the month, which translated into a year-over-year increase of 2.3%.

Food away from home increased by 0.3% in September and 3.9% annually, making it one of the hottest inflation categories.

Likewise, shelter costs were up by 4.9% year-over-year—higher than most other categories. As Creditnews recently reported, shelter costs have been vastly outpacing broader inflation for nearly three years running.

The report was a “disappointment, but inflation’s descent was going to be bumpy,” Ryan Sweet, the chief U.S. economist at Oxford Economics, told The Wall Street Journal.

Although headline CPI has declined sharply from its peak of 9.1% in mid-2022, this hasn’t translated into more cost savings for the average household. Quite the contrary.

As Minneapolis Fed President Neel Kashkari recently noted, it’s unlikely that America will ever see prices like those before the pandemic.

Household expenses are on the rise

It’s difficult to cheer falling CPI when two of Americans’ largest expenses—housing and food—continue to surge.

According to a recent BLS report, housing accounts for 32.9% of average household expenditures, followed by transportation (17%), and food (12.9%).

Housing costs were up 4.7% in 2023, while food expenses shot up by 6.9%. The latest CPI data clearly shows that cost pressures remain strong in 2024, further eroding household budgets.

A recent Creditnews Research report corroborated Americans’ strained housing budget, finding that nearly one in three families were “house poor” as of 2024.

As the Department of Housing and Urban Development explains, a household is considered “house poor” if it spends at least 30% of its gross income on shelter.

The BLS data showed that average annual expenditures for all consumer goods in 2023 were $77,280, a 5.9% increase from the previous year.

Meanwhile, the average inflation-adjusted income in 2023 was $80,610, leaving the typical household with just $3,330 after expenses.

Expenses are much higher in large coastal cities where many Americans flock to for work. According to Creditnews Research, in 85 of the largest 100 metros, the average family of four needs to earn more than $100,000 just to get by.

In the remaining 15 metros, households still need to earn between $87,000 and $97,000 to meet their living expenses.

“Middle- and low-income Americans aren’t doing well enough—they are living fragilely on the edge,” Gene Ludwig, chairman of the Ludwig Institute for Shared Economic Prosperity (LISEP), told CBS News.

A separate LISEP analysis found that the typical U.S. household was falling short of its basic living expenses by roughly $14,000 per year.

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