Certainly, prices for most manufactured consumer goods have been declining. Still, the inflation rate for various services remains elevated, which leads to many consumers being puzzled when paying their bills at restaurants, garages, or for insurance. In the Federal Reserve's preferred measure of inflation, the personal consumption expenditures (PCE) price index, the service segment in September increased by 3.7% year-over-year, while goods prices declined by 1.2% year-over-year. This decline in goods has helped general inflation move moderately toward the Fed's target rate of 2%.
The restaurant industry faces substantial pressure, with food service inflation rising by 3.6% in September. Chains like Chipotle (CMG, Financial) and McDonald's (MCD, Financial) noted persistent inflationary pressure partly due to increased wages, which have risen following the enactment of new minimum wage laws in states like California. These wage pressures drive up menu prices, though some restaurant chains attempt to counterbalance costs by offering meal deals.
Insurance is another sector experiencing higher inflation rates. Allstate and Progressive reported that household and auto insurance premiums rose by 10.1% and 6% year-over-year, respectively, driven by increased claims for storm-related damages and higher parts and labor costs.
Core services also continue to contribute to inflation, with housing costs up by 5.1% year-over-year. The travel industry also saw elevated costs, with air transportation prices rising by 4.1% in September.
While input costs have eased for food companies, cost pressures remain high. On average, food prices increased by 1.2% and beverages by 0.8%. Although this inflation rate is lower than in previous years, essentials like milk, eggs, and vegetable oil remain more expensive.
