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US Consumer Price Increases: The Effect of Hurricanes in the Gulf

  • October 15, 2017
  • By Pete Nisbet
  • 0

US consumer price increases last month reached the largest amount since January. A large part of this was due to hurricanes, and their effect on the production of oil refineries and gasoline in the entire area around the Mexican Gulf coast. According to the US Labor Department, the CPI (Consumer Price Index) increased by 0.5 % in September, following a 0.4% increase in August.

us consumer price increases

Inflation and Tax Rates

The year-on-year increase in the CPI since September last year was 2.2%, compared to a 1.9% figure for August to August. Due to the adverse weather conditions, the price of gasoline rocketed by 13.1% in September. This contributed 75% of the CPI increase! So, while inflation appears to have been higher than normal, it does have an explainable reason. That said, who is to reckon that climate change may not lead to further refinery disruptions in the future of this scale or greater?

 

Underlying inflation, not connected to these incidental occurrences, remains low. However, there are no assurances that these weather conditions may not become the norm in future years. Hurricane Harvey has more of an effect on refinery capacity than Hurricane Irma. So, not all hurricanes may have the same effect on refinery production and on inflation.

Will US Consumer Price Increases Trigger a Rate Hike?

Time will tell whether US consumer price increases will reach a level that triggers another interest rate hike. It seems unlikely right now. The effect of the recent hurricanes has been restricted mainly to refinery output. However, if climate change continues to disrupt refineries and other manufacturing facilities then who knows?

 

Perhaps gasoline price increases will result in significant hikes in transportation costs! Add that to US consumer price increases, and maybe the resultant inflation will trigger a Fed interest rate increase. This is one question that the Federal Reserve will likely have to face in the near future.

About Pete Nisbet

Pete has been working in the field of website design and content for many years. He has a great interest in technology and current affairs, particularly business affairs. Pete's interests are technology, writing and world affairs and he is widely traveled. Pete also holds an Honors BSc from the University of Edinburgh.