US Inflation Shows Uptick in Private Sector Data Amid Tariff Impact Concerns

Key Takeaways

• Private sector data shows an uptick in US inflation for September.
• Indicators like PriceStats and OpenBrand suggest increases in the prices of goods and products.
• Tariffs contribute to rising prices, especially for imported goods.
• Economists expect inflation to ease next year, focusing on service costs.
• Government CPI data is delayed due to the government shutdown.

In the absence of official government figures, private sector indicators revealed a slight rebound in US inflation during September, fueling further debate about the impact of tariffs pushing up certain prices. Data from PriceStats, based on online retailer sales, shows a marked increase in prices for goods such as household appliances and furniture, pushing the annual inflation rate to a two-year high.

Similarly, the OpenBrand indicator recorded the strongest monthly price growth since June, driven primarily by personal care products and communication equipment. Although September data suggests notable increases in some prices, particularly imported goods, economists believe inflation will begin to ease next year, focusing on the importance of service costs in this development.

Service costs, which are included more comprehensively in the Consumer Price Index (CPI) data, differ from private sector reports. The release of the CPI data has been delayed due to the government shutdown and is scheduled to be released later this month.

Ralph McLaughlin, Chief Economist at OpenBrand, described this trend as being like a plane beginning to land, while tariffs have caused some "bumps". He pointed out that the abolition of the "de minimis" rule in August, which allowed imported parcels valued at less than $800 to be exempt from tariffs, may have contributed to the rise in inflation last month.

"Tariffs are like small air pockets that cause the plane to shake, but overall the plane is still on a descending trajectory. This analogy represents our view of the impact of tariffs on prices," says McLaughlin.

In a related context, analysts Anna Wong and Alex Tanzi pointed out that "our tracking of millions of goods prices over the past few months suggests that the CPI in September may be moderate enough to reassure the Federal Open Market Committee (FOMC) to cut interest rates in October."

Unlike the labor market, there are few alternative indicators of inflation, as Federal Reserve Chairman Jerome Powell pointed out at a meeting on Tuesday. This is due to the labor-intensive nature of collecting price quotes. The Bureau of Labor Statistics (BLS) typically sends hundreds of data collectors across the country each month to collect prices for about 80,000 goods and services. This requires visiting a variety of businesses, from grocery stores to doctors' offices.

For the private sector, this is an equally challenging task, and the process goes beyond just data collection, says Alberto Cavallo. His "Billion Prices Project" laid the foundation for PriceStats.

Cavallo adds, "You have to make sure the data is classified correctly. Then you have to know what to include and what not to include, and you have to decide how to deal with missing data, how to adjust for seasonal and other patterns." He concludes, "So this is not an easy thing."