U.S. consumer inflation accelerated again in September as gasoline prices surged and annual core inflation reversed August’s decline.

The Bureau of Labor Statistics reported Oct. 14 that its Consumer Price Index increased a seasonally adjusted 0.6% month-over-month, following August’s 0.4% gain. Prices rose 3.7% year-over-year, up from 3.4%. The monthly increase matched economists’ expectations, while the annual reading exceeded forecasts of 3.6%.

Meanwhile, core CPI, which excludes food and energy, increased 0.3% for a second consecutive month, above expectations for a 0.2% gain. Annual core inflation climbed to 2.6% from 2.4%, exceeding forecasts of 2.5%.

Energy prices rose 5.2%, accelerating from August’s 2.1% increase. Gasoline jumped 9.1% and accounted for more than half of September’s overall monthly CPI gain. Fuel oil increased 15.3%, while electricity rose 0.2% and natural gas declined 0.3%.

Shelter increased 0.4%, compared with August’s 0.3% gain. Food prices were unchanged, as grocery prices declined 0.1% and food away from home increased 0.2%.

Used vehicles rose 0.7%, recreation increased 0.5% and airline fares climbed 1.2%. Medical care edged up 0.1%, while communication prices declined 0.2%.

Year-over-year, energy prices increased 20.4%, including gains of 34.2% for gasoline and 74.2% for fuel oil. Shelter rose 3.2% and food increased 2.5%.

MDM Analysis

September’s report suggests inflation’s summer improvement remains fragile. Energy drove the headline increase, but another above-forecast core reading gives the Fed additional reason to consider further tightening. For distributors, the practical concern is simultaneous pressure from fuel-related operating costs and borrowing costs, with less room for customers to absorb price increases. The report strengthens the case for cautious margin and inventory planning.