Inflation Trends Ease to a 7.7% Year-over-Year Increase in October 2022
Recently, the Bureau of Labor Statistics (BLS) reported that the consumer price index (CPI) eased to a 7.7% year-over-year increase in October 2022. This is down from an 8.2% increase in September. In addition, the CPI for all urban consumers rose by 0.4% from the same period last year, matching the increase in the previous two months.
The inflation rate remains significantly above its multiyear average. From 1960 to 2021, the average inflation rate was 3.8% per year. Yet, the monthly and annual rates of increase in the CPI came in lower than expected. The slowing inflation could lead the Federal Reserve to begin easing its interest rate hikes, which, according to experts, could improve the odds of avoiding a severe recession in the future.
Inflation still exceeds wage increases, even with the trend of inflation moving downward since September. While wage increases also jumped this year, real average hourly earnings decreased by 2.8% from October 2021 to October 2022, according to the BLS. This means that for many workers, wages haven’t kept up with heightened inflation.
Other key takeaways include that the CPI for all items excluding food and energy rose by 6.3% over the last 12 months. The CPI for energy increased by 17.6% in the past year, while the CPI for food increased by 10.9%. While these year-over-year increases continue to drive up the CPI, such increases have begun slowing. The positive news for consumers is that this easing growth demonstrates a much-needed break in climbing inflation concerns as the holiday season begins. Notably, gas and grocery prices have started to drop this past month, alongside decreasing home and rent costs.
“The monthly CPI is a regular reminder that inflation is outstripping what is otherwise pretty stout growth in household income, further validating the sour financial mood of American consumers.”
-Greg McBride, chief financial analyst at financial services company Bankrate
What’s Next?
Due to recent trends, it’s plausible that a low-inflation economy will emerge, curbing the likelihood of a recession. However, many economists have warned that in today’s uncertain economic environment, a recession is still a potential threat. As such, individuals should continue to monitor the ever-changing economy and associated inflation trends, adjusting their financial habits accordingly.
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