SOUTH BEND, Ind.-- New government data shows consumer prices rose three percent in September compared to a year ago.
According to ABC News, this was actually lower than economists expected. That inflation data led to records on Wall Street.
Michael J. Hicks, PhD, is a George & Frances Ball Distinguished Professor of Economics at Ball State University.
He shared some background on the state of the economy.
“We began the year with pretty robust growth. The economy grew close to 3% in the second half of 2024, and the first few weeks of 2025 were very strong. Inflation was coming down from the big 2022-2023 period, and so things look pretty good. Beginning January 20 up through April 8, which is ‘Liberation Day,’ the President imposed tariffs on all the rest of the world. Those tariffs have gone up and down almost 300 times, depending on the country and the day of the week. That has imposed great shocks to the US economy,” said Hicks. “So as best we can tell, because the shutdown hasn't given us the new employment data, but it looks like job growth in the US went from several 100 a month several 100,000 a month in 2024 down to zero or negative numbers for the past three or four months, and that those tariff related shocks are really now being felt in the price data, which we just got released today.”
ABC57 asked Hicks about today’s report and why it was better than expected.
“So, 3% is bad. Let's just say this is a bad inflation report. It's not as bad as it could have been. If it stays at 3% we're in a ‘stagflation’ period. We're going to see higher prices, lower economic growth, wage— there's no wage growth occurring. So, it's not like 22/23, which was pretty bad, but at least wages were rising at about the same rate, just with a six-month lag to price increases. There's no wage increase coming with this,” said Hicks. “So, Christmas is going to be a little bit tougher. Food's going to be more expensive at Thanksgiving. It's going to be a lot more expensive at Christmas. The first 90 days of next year it's going to be pretty tough in terms of inflation. As long as tariffs are continued, we're going to see prices higher than they would have been otherwise. Employment, lower and personal income, wages lower than they would have been otherwise.”
He says that the Federal Reserve did a good job reducing inflation throughout 2024 and the first few months of this year.
“Between December last year and April of this year, we went from 3% to about 2.4% inflation, which —it seems like a small number, that's a huge long-term effect on household spending. So that was at the point where the point where the federal reserve was beginning to feel comfortable reducing interest rates, so that mortgage rates will come down. Borrowing costs on cars and homes, and consumer electronics, for example, would drop, and then tariffs hit,” said Hicks. “Tariffs add about 17% to the overall cost of imports at their at their early august levels, they've gone up now we've stopped our negotiations as of this morning with Canada because of tv advertisement, the cost on China is now 100%, and so that stopped imports from a lot of countries, which you might think, 'Oh, I don't buy a lot of imported goods at Walmart or Target, so it doesn't bother me'. It affects every American-manufactured product that is partially composed of foreign goods. So, that's almost everything, every car, every RV, every consumer electronic, every home, anything that we make is reliant on some imported parts, and those prices are higher.”
That’s why he says he and other economists thought they’d see larger inflationary impacts of price increases.
Hicks says he thinks the reason behind that is the delays that the president put on early tariffs in April, May, and June, allowing businesses to stockpile roughly 5 months of product.
“So, those products, as of August and September, have not yet hit consumer shelves. And so, we haven’t seen this sort of ‘goods’ inflation that we would have expected. We're seeing it more in service. In housing and transportation services, in rent, and in restaurants. So, we're seeing it, for example, in some food products now, but the real shocks are still weeks or months ahead of us,” said Hicks.
Consumer Shopping behavior ahead of holidays:
Halloween is a week away and Christmas is 61 days away.
Although the National Retail Federation says 79 percent of shoppers anticipate higher prices due to tariffs this year, it predicts Halloween spending will reach $13.1 billion. NRF says that’s a record.
A spokesperson with the NRF tells ABC57 news that increased plans to purchase and spend more on average are driving that number.
Stephanie Carls is the retail insights expert with RetailMeNot.
She says prices on imported Halloween decor and costumes are showing pressure from higher shipping costs and tariffs. Additionally, she suggests buying fruit gummy candies can help stretch your money further, due to the higher chocolate prices.
To get the best deals, Carls says it’s a good idea to buy mixed variety bags instead of one brand or type of candy, and bulk bags from warehouse stores.
Carls says this week is when you want to take advantage of big box stores that are already slashing prices for Halloween items and making room for Christmas.
She says a lot of consumers are trying to do their holiday shopping ahead of time for the holidays, and retailers are having sales earlier, before Black Friday, and bringing in some inventory earlier.
“They know that people are wanting to try and figure out the best ways for them to stretch that budget and the amount of money across the time from, you know, now until Christmas. Because whenever that is hitting just your December budget, that's where I think it hurts the most,” said Carls.
Food prices:
Data from ABC News shows beef prices went up almost 15 percent over the year through September. Coffee prices, also increased by close to 20 percent over the past year.
ABC57 has reported on the link between coffee prices and tariffs, as imported coffee is subject to levies.
According to ABC News, agricultural economists identified several reasons that go into the rising costs of beef.
Data from ABC News shows beef prices went up almost 15 percent over the year through September. Coffee prices, also increased by close to 20 percent over the past year. That same data shows egg prices fell about 5 percent in September and are now roughly 1 percent lower than a year ago.
ABC57 asked Hicks if he thinks there is any end in sight for the higher prices of everyday items, including coffee and beef. He explained that, as well as impacts on other industries due to tariffs.
“No, not at all. As long as tariffs are in place, not only are imported prices going to go up, but domestically produced goods are going to rise with them. So steel is more expensive now than it was before we put tariffs on steel. Aluminum is more expensive. Food products are more expensive. Anybody who goes grocery shopping knows the price of beef is way up, the price of coffee is way up, even the price of milk is up,” said Hicks. “So you know, things that aren't necessarily associated with tariffs are still going to be affected, because if I'm a farmer, I now have to get replacement parts from my combine or my truck. They're more expensive if I'm offering an Uber ride, it's going to be more expensive because auto insurance is going to rise, because it's more expensive to fix an automobile with tariffs than it was beforehand. So even if I don't have a wreck, my insurance is going up.”