Prices for services rose 3.7% in September from a year ago,
according to the personal consumption expenditures price index,
the inflation gauge of choice for the Federal Reserve. Prices
for goods, though, have been falling, which has helped cool the
overall rate of inflation nearly back to the Fed's goal of 2%.
Restaurants, with traditionally tight margins and tough
competition for diners' dollars, are among the harder hit
sectors dealing with stubborn inflation. Food services inflation
rose 3.6% in September. Chains including Chipotle, McDonald's
and others say they expect inflation pressure from wages to
continue.
Higher wages drive up costs for restaurants, often prompting
menu prices to also rise. Pressure from rising wages increased
following mandatory increases in minimum wages in California.
McDonald's and other restaurants have tried to attract more
cautious consumers with menu deals as the price of eating out
rises compared with eating at home.
Home and car insurance inflation also remains stubbornly high.
Household insurance premiums were up 10.1% from a year ago,
while auto insurance was up 6%. Companies including Allstate and
Progressive have said increased storm damage and more costly
parts and labor for repairs are keeping prices high.
The housing market, particularly rent, has been one of the
biggest drivers of services inflation. Overall housing costs
rose 5.1% in September from a year ago. The travel sector is
also facing sticky inflation. Air transportation costs rose 4.1%
in September.
Prices for goods fell 1.2% in September and have been easing or
cooling since late 2023, but pressure remains for food
companies. Many of those companies are hesitant to pass along
more price increases to consumers as people become more cautious
about spending.
Overall, food and beverage prices rose 1.2% in September, with
particularly big increases for items including milk, eggs and
oils. Kraft-Heinz recently warned investors that inflation for
things like coffee and dairy products will weigh on its margins
and operating income for the year.
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