In October, prices in the U.S. stayed steady and overall inflation slowed even further. This was the fourth consecutive month that prices were at the same rate, according to the Consumer Price Index.
The index, which measures changes in retail prices, showed a seasonally adjusted annual rate of inflation at 1.8 percent. This is down .2 percent from the previous month and is the lowest rate since October 2016.
Economists agree that a moderate level of inflation is necessary for a healthy economy. Rates that are too low can be a sign of a sluggish economy, while rates that are too high signal an eroding purchasing power of consumers.
In October 2019, the biggest drivers of the decline in inflation were energy prices. These declined by 2.5 percent and offset a slight increase of .3 percent in the cost of food. Other areas of the index, such as apparel prices and the cost of new vehicles, increased only marginally.
However, despite the overall decrease in inflation, wage increases remained well below the inflation rate. A separate report from the Department of Labor showed that wages increased only 3.3 percent year-over-year. This is enough to realistically offset the 1.8 percent rate of inflation, but well below the 4 percent economists recommend to provide a consistent buying power of consumers.
It’s likely that the combination of moderated consumer prices and low wage increases will continue for the foreseeable future. This complicates the economic projections of the Federal Reserve, who have stated they plan to hold-off on a rate cut until the jobs market shows positive improvement.
Overall, the cost of goods and services in the US economy were held steady in October. But without a wage increase to match, consumers will need to become more thrifty in their purchases in order to keep up with the cost of living.