October 16, 2008 (Prices Byte)

Inflation Levels Off in September

Prices Byte by Dean Baker

For Immediate Release: October 16, 2008
Contact: Alan Barber, (202) 293-5380 x115

"Beneficiaries will have the largest Social Security COLA in more than a quarter century."

The overall Consumer Price Index was unchanged in September after falling 0.1 percent in August. The core CPI rose by just 0.1 percent after a 0.2 percent increase in August. Over the last quarter, the CPI has risen at 2.6 percent annual rate, down from a 4.9 percent rate of increase over the last year. The core CPI has risen at a 2.7 percent annual rate, up slightly from the 2.5 percent rate over the last year.
Many of the sources of higher inflation in prior months appear to have evaporated in the last two months. This is the case not only with energy prices, which dropped sharply for the second consecutive month, but also with a wide range of other products.

For example, new car prices, which had been close to flat in the summer months, fell 0.6 percent in August and 0.7 percent in September. Clearly, manufacturers feel the need to lower prices sharply in the wake of plunging sales. Inflation other goods and services” has been just 0.2 percent for the last two months. Prices in this sector had been increasing at a 4.8 percent annual rate in the first half of the year.