Oil above $100 a barrel is hitting American households and businesses harder, and this week’s data should show just how much. Economists surveyed by Bloomberg expect the consumer price index to jump 0.6% in September, up from 0.4% a month earlier. That would mark the biggest monthly gain in five months. Gasoline, averaging well above $4 a gallon, is the likely culprit.
The Energy Squeeze
Renewed violence in the Iranian conflict pushed crude past $100, while diesel prices remain just below the record highs set in September. The U.S. war with Iran is now in its eighth month. Neither side looks willing to give ground, and the report offers little reason to expect relief at the pump soon.
The Bureau of Labor Statistics is due to release the figures Wednesday. Underlying price pressures are expected to ease even as headline inflation runs hotter. Energy costs don't stay at the gas station, though. PepsiCo said last week it's raising prices on Doritos and other products, citing higher costs for fuel, aluminum and commodities. That's how a geopolitical shock travels from a pipeline to a pantry shelf.
Producer Prices and the Fed
Thursday brings the producer price index, which tracks inflation before it reaches consumers. Economists expect it to climb from 5.4% in August; that figure was itself up from 4.8% in July. Those are steep numbers, and they suggest more cost pressure is still moving through the supply chain.
The Federal Reserve recently raised its benchmark interest rate to cool inflation and is leaning toward another hike by the end of the year. The hot September reading supports expectations that the central bank will hold off on raising rates this month. Inflation is also becoming a central issue in the midterm elections, now less than a month away.
Housing and the Consumer
Higher borrowing costs are biting. Freddie Mac reported Thursday that the average long-term U.S. home-loan rate has risen for a seventh straight week. It now sits higher than at any point in nearly three years. The National Association of Realtors reports existing-home sales for September on Tuesday, and economists expect sales to hold steady from August, when they fell to their slowest annual pace in more than a year.
The housing sector has slumped since 2022—four years now. Sales of previously occupied homes stayed essentially flat last year, at a 30-year low. Prospective buyers keep getting shut out by rising mortgage rates.
Shoppers, meanwhile, have kept spending. Retail sales rose 1.2% in August, nearly twice the forecast, despite complaints about prices at gas stations and grocery stores. Economists now expect Americans to have pulled back in September, with most forecasting a 0.65% increase. The National Retail Federation will release its holiday forecast next week.
Banks Cash In
One corner of the economy is thriving. Banks have posted record profits this year as volatile stock markets boosted trading activity, commissions and fee revenue, while consumer spending supported lending. Analysts expect JPMorgan Chase to report a 47% jump in profits and Citigroup a 61% increase Tuesday. Bank of America is expected to show a 36% gain Wednesday. Morgan Stanley and other institutions report later in the week.
High interest rates weigh on households and businesses, while letting banks charge more for loans. Borrowers feel the squeeze. Lenders collect the spread.
Why This Matters:
The numbers point to a squeeze policymakers can't easily fix. A war-driven oil shock is raising costs for families and companies alike, and the Federal Reserve is leaning toward higher rates to contain it, deepening pain for homebuyers already priced out. Record bank profits alongside a frozen housing market show how unevenly that burden falls. With the midterms weeks away, voters will weigh who they think can ease prices without stoking more inflation. From a fiscal and market perspective, the central bank's credibility and energy supply stability now matter more than any new spending promise.