US Inflation Shows Signs of Rebound Amid Tariff Impacts: Private Sector Data

Private Sector Data Highlights a Return of Inflation in the US

Private sector indicators suggest a rebound in US inflation during September, providing further evidence that tariffs may be pushing up prices on certain goods. In the absence of official government data due to the government shutdown, these private figures offer an early glimpse into price trends.

Data from PriceStats, based on online retailer sales, reveals a significant increase in prices for goods like household equipment and furniture. This surge has pushed the annual inflation rate to a two-year high. Similarly, another indicator from OpenBrand showed the strongest monthly price growth since June, primarily driven by personal care products and communication equipment.

Despite these notable increases in certain prices, particularly imported goods, economists anticipate that inflation will begin to ease over the coming year. The stabilization of service costs is seen as crucial to this development, although these costs are not fully reflected in private sector data but are more comprehensively captured in the government's Consumer Price Index (CPI). However, the release of September's CPI data has been delayed due to the government shutdown and is now scheduled for later this month.

Ralph McLaughlin, chief economist at OpenBrand, described the trend as akin to an airplane beginning its descent, with tariffs causing some "bumps." He noted that the August elimination of the 'de minimis' rule, which previously allowed imported shipments valued at less than $800 to be exempt from tariffs, may have contributed to last month's inflation.

According to McLaughlin, "Tariffs are like little air pockets that cause the plane to bump up, but overall, the plane is still on a downward trajectory." He added, "That analogy is our view of what tariffs will do to prices."

As Bloomberg analysts Anna Wong and Alex Tanzi stated, "Our tracking of millions of prices over the past few months suggests the September CPI may be mild enough to give the FOMC comfort to pull the trigger on a rate cut in October."

Challenges in Measuring Inflation

Unlike the labor market, there are few alternative indicators for inflation, as Federal Reserve Chairman Jerome Powell noted 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 gather prices for approximately 80,000 goods and services. This requires visiting a variety of businesses, from grocery stores to doctor's offices.

For the private sector, this is an equally challenging task, and it extends beyond simply collecting data, explained Alberto Cavallo. His "Billion Prices Project" is the foundation upon which PriceStats is built.

Cavallo explains, "You have to make sure the data is classified properly. Then you have to decide what to include and what not to include, you have to decide what to do when data is missing, how to adjust for seasonality and other patterns." He adds, "So it's not easy."

During the government shutdown, this process by the BLS, along with most of its operations, was halted. However, the agency was instructed to recall some employees to prepare the September CPI so that the Social Security Administration could determine its annual cost-of-living adjustment. The report is now scheduled for release on October 24.

Until then, investors can turn to private sector data for an initial glimpse. However, these indicators typically do not include prices for services such as dining out and travel.

The OpenBrand report only covers durable and personal goods, divided into categories such as household appliances and cosmetics.

Similarly, PriceStats is biased towards goods and does not track housing inflation. Some platforms like Zillow Group Inc. and Realtor.com have their own housing price indicators, but the BLS uses a unique calculation formula to calculate housing costs, and its broader CPI housing category also includes hotel accommodations.

Other reports only suggest certain aspects of inflation but do not reflect the extent of price increases. A service price indicator from the Institute for Supply Management (ISM) rose last month to one of its highest levels in nearly three years; A September small business survey found that a net 31% of owners plan to raise prices in the next three months, one of the highest proportions since early 2024.

Michael Metcalfe, head of macro strategy at State Street Global Markets, which analyzes and distributes PriceStats data, says, "We are starting to get a little more concerned about this trend." He adds, "We are currently entering a period where prices should be fairly weak, but PriceStats data is not showing that normal weakness at the moment."

It is currently unclear what kind of discounts retailers can offer consumers this holiday shopping season. President Trump's latest tariffs on wood and wood products only went into effect last Tuesday, but according to the "Tariff Tracker" of the Harvard Business School Pricing Lab (led by Cavallo), the announcement on September 29 has already led to price increases for domestic and imported goods.

Cavallo concludes, "Although responsive to new developments on the trade front, the broader trend shows that the impact on consumer prices is more stable."

He adds, "I think a lot of people expect a big change, and then a sharp rise in inflation. But that's not the case." He concludes, "It's more like a gradual transition that is slowly putting upward pressure on prices."