Fed Beige Book: "Regions Seeing Faster Inflation Rise to 4 from 1"... CPI Tops Forecasts

Three Regions Also Report Strong Inflation
Businesses Pass on Higher Energy and Transportation Costs

Inflation in the United States has picked up pace again. Among the 12 regions overseen by the Federal Reserve (Fed), the number where prices rose faster increased to four from one in the previous survey. The Consumer Price Index (CPI) also rose more than expected by the market.

Federal Reserve (Fed). Reuters-Yonhap News

According to the Beige Book released by the Fed on October 14 local time, prices rose faster than in the previous survey in four of the 12 Federal Reserve districts. This contrasts with the Beige Book released in September, which found that inflation had accelerated in just one region.

The number of regions describing inflation as strong also rose to three from one in the previous survey. In another three regions, businesses faced intensifying pressure from rising input costs, including raw materials, or costs had already reached high levels.

The Fed said in the Beige Book that the effects of high oil prices were evident in every region. In particular, businesses reported that additional costs resulting from higher diesel prices were being passed along throughout the supply chain through fuel surcharges. In addition to energy prices, tariffs, raw material prices, and higher insurance premiums were also cited as factors increasing companies' cost burdens.

The previous report emphasized that businesses were unable to fully pass on higher costs to selling prices because consumers were resisting price increases. This report found that, despite those constraints, businesses in some regions were passing on costs more visibly.

In the Cleveland Fed district, selling prices for goods and services rose sharply as businesses passed higher input costs, including those for raw materials, on to customers. In Kansas City, many manufacturers also said they could pass on higher diesel and transportation costs to consumers.

New York Businesses: "Broadest Inflationary Pressures Since COVID-19"

Products on display at a supermarket in Manhattan, New York. New York, U.S. = Hwang Yunju, correspondent.

Inflationary pressures also intensified in New York. According to the New York Fed, the pace of selling price increases among businesses rose from a modest level to the upper end of that range. A food manufacturer in New York said it had not experienced such broad inflationary pressures since COVID-19.

Tariffs also increased cost burdens for manufacturers and wholesalers and retailers. Some businesses passed the additional costs on to selling prices, while others absorbed them because consumers resisted price increases.

Rising health insurance premiums also added to businesses' burdens. Companies that renewed their insurance contracts reported sharp increases in premiums, along with higher deductibles for members.

Inflationary Pressures Rise, Adding to Fed's Rate Decision Challenge

While inflationary pressures expanded, U.S. economic growth appeared to have weakened somewhat.

In the latest Beige Book, nine of the 12 districts reported an increase in economic activity, down by one from 10 in the previous survey. Economic activity changed little in the other three districts.

Consumer spending was also sluggish. Spending changed little in most regions, and high-income households were the main drivers of consumption in more than half of them. By contrast, lower-income households became more cautious about spending under the burden of high prices.

Employment was broadly stagnant. Businesses refrained from hiring, while some also moved to reduce labor demand by using artificial intelligence (AI) and automation to boost productivity.

The Fed raised its benchmark interest rate by 0.25 percentage point in September, beginning monetary tightening for the first time since 2023. With economic indicators pointing to persistent inflationary pressures arriving one after another ahead of the Federal Open Market Committee's (FOMC) regular meeting on October 27-28, debate over whether to raise rates further is expected to intensify.

September CPI Tops Forecasts... Inflation Picks Up Again

New York residents are checking prices at a supermarket in Manhattan. New York, U.S. = Hwang Yunju, correspondent.

The U.S. CPI for September came in above market expectations. The U.S. Department of Labor announced that the CPI rose 3.7% year over year in September. That exceeded the 3.6% forecast by economists surveyed by Dow Jones. Compared with the 3.4% increase in August, the rate was up 0.3 percentage point.

On a month-over-month basis, the CPI rose 0.6%, in line with market expectations. However, the increase accelerated from 0.4% in August, marking the largest monthly rise in five months.

Core CPI, which excludes volatile food and energy prices, also rose 2.6% year over year, exceeding the market forecast of 2.5%. This was 0.2 percentage point higher than the 2.4% increase in August. On a month-over-month basis, it rose 0.3%, also above economists' forecast of 0.2%.

Energy prices were the main driver of inflation. Gasoline prices surged 9.1% in September from the previous month, accounting for more than half of the monthly increase in the overall CPI. Energy prices rose 5.2%, while housing costs increased 0.4%.

This content was produced with the assistance of AI translation services.