US Inflation Climbs to 3.7 Percent, Highest Since May, as Gasoline Rises 34.2 Percent in a Year
US consumer prices rose 0.6 percent in September on a seasonally adjusted basis, after 0.4 percent in August, and the annual rate before seasonal adjustment climbed to 3.7 percent from 3.4 percent, the Bureau of Labor Statistics reported on Wednesday at 12:30 GMT. No month since May, when the rate stood at 4.2 percent, has matched it. Core prices, which exclude food and energy, rose 0.3 percent for a second month and 2.6 percent over the year, up from 2.4 percent. The widening gap between the two comes mainly from energy, gasoline above all. On our calculation, energy carries a 7.4 percent weight in the index yet supplied 36 percent of the past year’s inflation, 4.9 times its share of the basket.
Gasoline did the monthly work
The gasoline index jumped 9.1 percent in September after 3.9 percent in August, and on its own added 0.337 percentage point to the monthly rise, which the agency put at over half of the all items increase. Before seasonal adjustment, pump prices rose 6.5 percent. The energy index rose 5.2 percent, its largest monthly gain since March, when it jumped 10.9 percent. Utility prices changed little: electricity rose 0.2 percent and natural gas fell 0.3 percent, so the push came from motor fuel and fuel oil rather than household utilities. Fuel oil climbed 15.3 percent in the month. Outside energy, food prices were flat, with food at home down 0.1 percent and food away from home up 0.2 percent, and shelter rose 0.4 percent.
Over 12 months the gasoline index is 34.2 percent higher, fuel oil 74.2 percent and energy as a whole 20.4 percent. Gasoline and energy are both at their steepest annual rates since May, when gasoline stood 40.5 percent above its year earlier level and energy 23.5 percent.
The monthly record since March shows how closely the headline tracks the pump. In 5 of the 7 months the headline outran core. The 2 exceptions, June and July, were the only months in which gasoline fell, and in June the all items index dropped 0.4 percent while core was flat.
Monthly change since March, seasonally adjusted
| Month | All items | Core | Gasoline |
|---|---|---|---|
| March | 0.9% | 0.2% | 21.2% |
| April | 0.6% | 0.4% | 5.4% |
| May | 0.5% | 0.2% | 7.0% |
| June | -0.4% | 0.0% | -9.7% |
| July | 0.1% | 0.2% | -2.9% |
| August | 0.4% | 0.3% | 3.9% |
| September | 0.6% | 0.3% | 9.1% |
Percent change from the preceding month, 2026, seasonally adjusted. Core is all items less food and energy.
Where the 3.7 percent came from
The release measures how many percentage points each component added to the annual rate. Energy added 1.353 points, gasoline alone 1.093 and shelter 1.142. Set against the unrounded index rise of 3.74 percent, on our calculation gasoline accounts for 29 percent of the year’s inflation from a 3.9 percent weight, 7.6 times its share of spending. Shelter, at 35.3 percent of the basket, supplied 31 percent, a little less than its weight. Food, 13.5 percent of the basket, supplied 9 percent after rising 2.5 percent over the year, with egg prices down 20.6 percent.
Strip energy out and prices are 2.6 percent higher than a year ago, the same rate as core. Services less energy services rose 0.4 percent in September and 3.1 percent over the year, enough to supply 51 percent of annual inflation on our calculation, while core goods are only 0.7 percent dearer, a gap of 2.4 points. Within services, airline fares rose 1.2 percent in the month and 22.4 percent over the year, adding 0.201 point, or 5.4 percent of the total on our calculation, from a 1.04 percent weight. Motor vehicle insurance worked the other way: down 5.0 percent over the year, it subtracted 0.136 point. Separately, prescription drugs fell 4.5 percent over the year, the weakest annual reading in that series’ history, according to the release.
Contributions to the 12 month rise
| Component | Weight | 12 months | Points added |
|---|---|---|---|
| All items less food and energy | 79.075 | 2.6% | 2.046 |
| Services less energy services | 60.240 | 3.1% | 1.904 |
| Energy | 7.418 | 20.4% | 1.353 |
| Shelter | 35.323 | 3.2% | 1.142 |
| Gasoline | 3.853 | 34.2% | 1.093 |
| Food | 13.507 | 2.5% | 0.338 |
| Airline fares | 1.040 | 22.4% | 0.201 |
| Motor vehicle insurance | 2.531 | -5.0% | -0.136 |
Weight is relative importance in August 2026; changes are September 2025 to September 2026, not seasonally adjusted. Points added is the agency’s own measure of each component’s effect on the 12 month rise; it does not equal the August weight times the change. Services, shelter, gasoline, airline fares and motor vehicle insurance are parts of larger groups, so the column does not sum. Shares in the text are our calculation: points added divided by the unrounded 3.74 percent rise. Bureau of Labor Statistics.
Pay falls behind prices
Average hourly earnings for all employees on private nonfarm payrolls rose 0.1 percent in September to 37.81 dollars, well short of the 0.6 percent rise in prices, so real hourly earnings fell 0.5 percent on the month, the agency’s Real Earnings release showed. Over the year hourly pay is up 3.0 percent against 3.7 percent for the seasonally adjusted price index, a real decline of 0.7 percent. A year ago the position was reversed: in September 2025 pay was growing 3.8 percent against inflation of 3.0 percent, a real gain of 0.8 percent. Real weekly earnings fell 0.5 percent on the month, with the workweek unchanged; over the year a workweek 0.6 percent longer kept their fall to 0.1 percent. Production and nonsupervisory employees, whose price index rose 0.7 percent in the month, saw real hourly pay fall 0.6 percent on both the month and the year.
Pay against prices, private nonfarm employees
| Measure | Sep 2025 | Sep 2026 | Change |
|---|---|---|---|
| Average hourly earnings | $36.70 | $37.81 | 3.0% |
| Average weekly earnings | $1,255.14 | $1,300.66 | 3.6% |
| Real hourly earnings, 1982 to 1984 dollars | $11.32 | $11.24 | -0.7% |
| Consumer price index, seasonally adjusted | 324.245 | 336.298 | 3.7% |
Seasonally adjusted; September 2026 earnings are preliminary. Weekly pay rose 45.52 dollars over the year on our calculation.
The Federal Reserve raised its target range for the federal funds rate by a quarter point to 3.75 to 4 percent on 16 September, in a 12 to 0 vote, with a statement that read “Inflation remains elevated.” The central bank’s 2 percent goal is measured by the annual change in the price index for personal consumption expenditures, a separate gauge, rather than by the consumer price index.
Why it matters: The September report shows a fuel shock lifting the headline rate on top of steadier underlying pressure. Energy and airline fares supplied an outsized share of the rise, but shelter and other services still added more than half of the year’s inflation, and core rose to 2.6 percent from 2.4 percent, 1.1 points below the headline against 1.0 point in August. Core goods, by contrast, are rising far more slowly. For workers on private payrolls the cost is already visible: real hourly pay fell 0.5 percent in September and is 0.7 percent lower than a year ago.
Outlook: The Federal Reserve’s next policy meeting runs on 27 and 28 October, before the October price data. That report, together with the October Real Earnings figures, is scheduled for Tuesday 10 November at 13:30 GMT, and will give one more reading on whether gasoline rises for a third straight month or falls back as it did in June and July, and on whether real pay recovers.
Sources: US Bureau of Labor Statistics, Federal Reserve, The Edge.
