Helping clients meet their business challenges begins with an in-depth understanding of the industries in which they work. That’s why KPMG LLP established its industry-driven structure. In fact, KPMG LLP was the first of the Big Four firms to organize itself along the same industry lines as clients.

How We Work

We bring together passionate problem-solvers, innovative technologies, and full-service capabilities to create opportunity with every insight.

Learn more

Careers & Culture

What is culture? Culture is how we do things around here. It is the combination of a predominant mindset, actions (both big and small) that we all commit to every day, and the underlying processes, programs and systems supporting how work gets done.

Learn more

Inflation hotter than expected in September

Inflation has not disappeared.

October 12, 2023

The Consumer Price Index (CPI) rose 0.4% in September, after advancing 0.6% in August, slightly above market expectations. Prices at the gas pump increased 2.3% during the month, after surging 10.5% in August. Prices at the pump have since receded and are hoped to be more of a neutral for inflation in October.

Food prices at the grocery stores were nearly unchanged with an increase of 0.1%. That gain masked a jump in the costs of proteins - meat, poultry, pork and eggs - which was offset with a sharp drop in the costs of cereals and baked goods. That makes for some hard tradeoffs at the grocery store for low- and middle-income households. The overall index was up 3.7% for the month, the same as August, and is off the low for the year, which was 3% in June. The CPI peaked in June 2022, which helped to cool year-over-year measures in June 2023.

The cost of going out to eat accelerated 0.4% during the month, after cooling a bit in July and August. Employment at restaurants crossed a February 2020 peak in September on the heels of a surge in new business formation. People have shifted where they are spending their discretionary dollars from major urban centers to the suburbs.

The core CPI, which strips out the volatile food and energy components, rose 0.3% in September, the same as August. Shelter costs accelerated in September, with all components picking up, including the costs of insurance. This is something the Federal Reserve has openly worried about. The recent rebound in home values, despite high mortgage rates, has shifted the focus on cooling inflation to other sectors of the economy. Note: Rents had been falling in the high frequency data, but we are seeing a return of young adults (18-24-year-olds) to urban areas, which along with high housing costs, is buoying the demand for apartment and home rentals. The core CPI cooled to a 4.1% pace from a year ago, its slowest pace since the fall of 2021 when inflation was still accelerating.

The core services component of the CPI, which strips out rents of apartments and homes, jumped 0.6% during the month, an acceleration over the 0.4% pace of August. Gains in airfares, hotel room rates and insurance costs all picked up. Those out and on vacation reached the highest level for the month of September since 2016 last month, which suggests that travel remained unusually strong at the start of the school year. Baby boomers are spending more than previous generations as they enter retirement. The three-month annualized pace jumped to 4.8% during the month, more than double the pace of August. The six-month annualized pace was up 3.1%, 0.5% ahead of the pace of August. The year-on-year measure of the super core, as it is known, showed signs of cooling in August.

The persistence of core services inflation is particularly worrisome to the Federal Reserve, as it accounts for more than half of inflation for the overall economy. It is also being distorted by a mismeasurement in the health insurance figures, which shows medical insurance costs down nearly 40% from a year ago. That will be rectified with revisions to the calculation of CPI in October and become a driver instead of a drag on overall inflation measures. The Fed is aware of the change. 

We still think that the recent rise in bond yields is enough to keep the Fed on the sidelines in November.

Diane Swonk, KPMG Chief Economist

Bottom Line:

Inflation has not disappeared and remains too high, something the Fed has made clear. We still think that the recent rise in bond yields is enough to keep the Fed on the sidelines in November. That tightening of credit conditions is broader than anything the Fed could accomplish with hikes to short-term rates and is doing some of the work for the Fed. Everything from mortgage rates to corporate and municipal bond yields are affected by the Treasury bond market.

Explore more

Meet our team

Image of Diane C. Swonk
Diane C. Swonk
Chief Economist, KPMG US

Subscribe to insights from KPMG Economics

KPMG Economics distributes a wide selection of insight and analysis to help businesses make informed decisions.

Thank you

Thank you for subscribing. You should receive a confirmation e-mail soon.

Subscribe to insights from KPMG Economics

Now more than ever, companies are using data to make informed decisions about the future of their business. KPMG Economics is continuously monitoring and analyzing economic and geopolitical data so we can provide business leaders with reliable and timely insight and analysis.

To receive our Economic Updates and other relevant content published by the KPMG Economics as soon as it is released, please provide the following details:

By submitting, you agree that KPMG LLP may process any personal information you provide pursuant to KPMG LLP's Privacy Statement.

An error occurred. Please contact customer support.

Thank you!

Thank you for contacting KPMG. We will respond to you as soon as possible.

Contact KPMG

Use this form to submit general inquiries to KPMG. We will respond to you as soon as possible.

By submitting, you agree that KPMG LLP may process any personal information you provide pursuant to KPMG LLP's Privacy Statement.

An error occurred. Please contact customer support.

Job seekers

Visit our careers section or search our jobs database.

Submit RFP

Use the RFP submission form to detail the services KPMG can help assist you with.

Office locations

International hotline

You can confidentially report concerns to the KPMG International hotline

Press contacts

Do you need to speak with our Press Office? Here's how to get in touch.