• The consumer price index rose by 2.4% in September 2024 on an annual basis, according to the Bureau of Labor Statistics.
• Inflation declined amid a pullback in gasoline prices and moderation in housing inflation.
• There were some trouble spots, however, such as groceries and car insurance.

Inflation fell in September as lower gasoline prices combined with other waning price pressures in areas such as housing to bring relief to consumers' wallets, according to the U.S. Bureau of Labor Statistics.

The consumer price index, a key inflation gauge, was up 2.4% last month from September 2023, the bureau said.

That figure is a decline from 2.5% in August, meaning price growth slowed. It's also the smallest annual reading since February 2021.

The September CPI figure was slightly higher than economists predicted, however.

There were some trouble spots, such as an uptick in categories including clothing, car insurance and groceries. Most appear to be "one-off" increases, though, said Mark Zandi, chief economist at Moody's.

"The trend on inflation remains very positive," Zandi said. "This month was a blip and I don't think it will be sustained."

The CPI measures how quickly prices are rising or falling for a broad basket of goods and services, from car repairs to peanut butter and living room furniture.

Inflation has pulled back significantly from its pandemic-era peak of 9.1% in June 2022. It's moving toward policymakers' long-term annual target, near 2%.

"We have made substantial improvement over the past two years," said Sarah House, senior economist at Wells Fargo Economics.

That said, a slowdown in the labor market has concerned economists more than inflation in recent months.

The U.S. Federal Reserve, which had raised interest rates sharply to combat high inflation starting in early 2022, began cutting them in September to take pressure off the labor market and economy.

Prices fall at the gas pump

A pullback in gasoline prices has helped inflation throttle back.

A gallon of regular gasoline cost $3.21 in September, down 16% from $3.84 a year ago, according to the U.S. Energy Information Administration.

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Gasoline prices declined about 4% during September alone, according to CPI data.

Gasoline is refined from crude oil. Oil prices hit a nearly three-year low in September amid weak demand in China, the world's largest importer, and concerns of oil supply outstripping demand. Prices have jumped in October, however, due to factors such as heightened geopolitical risk in the Middle East and Hurricane Milton.

Annual food inflation is 'fairly tame'

Food inflation over the past year has also been "fairly tame," House said.

Grocery prices are up 1.3% since September 2023, according to the CPI.

Prices for agricultural commodities — a "major input cost" for food — have either fallen or look "more stable," House said. Examples of agricultural commodities include corn, wheat, coffee and soybeans.

Wage growth has slowed, reducing labor costs to transport or prepare food, for example, House said. And grocery stores have offered more price incentives and promotions as consumers become more concerned about their spending, she said.

That said, grocery inflation did see a large jump on a monthly basis from August to September, to 0.4% from 0%.

"I don't think that will be sustained going forward," Zandi said.

Individual food items have their own unique supply-and-demand dynamics that can affect pricing.

For example, egg prices rose by more than 8% from August to September, and by 40% since September 2023, largely due to another outbreak of avian flu, a contagious and lethal disease that affects chickens and other birds, said economists.

Housing inflation is declining

Housing accounts for the largest share of CPI — and has been the biggest stumbling block in getting inflation back to its target level, economists said.

"It's a huge component," House said. "What happens there can really move the dial when it comes to overall inflation and core inflation."

CPI shelter inflation — which includes rental prices and an equivalent measure for homeowners — has gradually declined but remained stubbornly high. That has puzzled many economists, since real-estate data shows that growth for average rents of new tenants has been muted for about two years.

In September, shelter inflation throttled back on a monthly basis, to 0.2% from 0.5% in August.

That's among the most encouraging signals in the latest CPI report, economists said.

"Shelter inflation is now definitively moderating," Zandi said. "And that's such a key part of the CPI."

'Slower to recede'

Housing falls into the "services" category of the economy.

Inflation for goods has largely throttled back from pandemic-era nosebleed levels as out-of-whack supply-and-demand dynamics unwind, economists said.

But services inflation "has still been pretty slow to recede," House said.

Largely, that's been because of shelter. But other categories also remain elevated.

Many services "rely heavily" on prices in other parts of the economy, House said. For example, insurers are now raising car insurance premiums following an earlier surge in new and used car prices.

Prices for motor vehicle insurance increased 1.2% from August to September and about 16% since September 2023, according to the CPI.

It typically takes a while for such dynamics to filter through, on paper, to the services side, she said.

"Services inflation was slower to peak on the way up and likely to be slower to recede on the way down," she said.