Will inflation keep slowing in the US the rest of 2023? Here’s what the experts say
Inflation has been a problem in the US for over a year now but has been approaching the Federal Reserve target of 2%. Can it be achieved this year?
While inflation is still above the Federal Reserve’s target rate, the latest economic data has shown a big fall compared to 2022. Even though the headline number from the recent Consumer Price Index report showed price increases held steady in September from the prior month at 3.7 percent. Core inflation, which strips out volatile food and energy costs, dropped to 4.1 percent compared to 4.3 percent in August.
Two of the areas that economists have been watching for price increases are those on cars and housing.
Since April 2023, the CPI had shown a month-over-month decrease or zero growth in the price of new cars until Ausgust. August registered a 0.3 percent rise, 2.9 percent higher than the same time last year, while September saw the same increase again. Used car prices as well have seen significant back-to-back monthly price drops since June. Last month, they were down 8 percent year-over-year.
“Right now, we’re seeing some weakening price momentum in goods overall, particularly used cars,” said senior economist at Interactive Brokers José Torres speaking to CNN. “But we’re also seeing new vehicle [prices] slow down, and we think that prices will continue to come down into year-end.”
He credits high interest rates for cooling demand, especially in the motor vehicle category. Additionally, the “sector is just tough for consumers to make purchases in” due to reduced credit availability.
One concern for experts though is the ongoing UAW strike against the ‘Big 3′ that began 15 September, though could soon be ending.
The duration of the industrial action could have a knock-on effect on the supply of parts as the disruption trickles through the automotive industry driving up prices on repairs.
Housing costs unexpectedly increased in September
August saw the smallest gain in shelter costs since January 2022 rising 0.3 percent from the month before.
“We’ve seen rental costs decelerate pretty sharply over the past year,” Sarah House, senior economist at Wells Fargo, told CNN last month. “We’re seeing rents for single-family homes also moderate pretty extensively, and so as that starts to show in the official measures of inflation, we think that there’s a lot more weakness to come out of that sector.”
However, prices in September actually leapt up 0.6 percent, meaning shelter prices are now 7.2 percent higher than they were this time last year.