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Inflation in the United States accelerated in September, with the cost of housing and other necessities intensifying pressure on households, wiping out pay gains that many have received and ensuring that the Federal Reserve will keep raising interest rates aggressively.

Consumer prices rose 8.2% in September compared with a year earlier, the government said Thursday. On a month-to-month basis, prices increased 0.4% from August to September after having ticked up 0.1% from July to August.

Yet excluding the volatile categories of food and energy, so-called core inflation jumped last month — a sign that the Fed’s five rate hikes this year have so far done little to cool inflation pressures. Core inflation climbed 0.6% from August to September and 6.6% over the past 12 months. The yearly core figure is the biggest increase in 40 years. Core prices typically provide a clearer picture of underlying price trends.

Major U.S. markets swung sharply lower, with the Dow Jones Industrial Average futures moving from several hundred points up to a 400 point decline in seconds. Markets in Europe tumbled as well.

Thursday’s report represents the final U.S. inflation figures before the Nov. 8 midterm elections after a campaign season in which spiking prices have fueled public anxiety, with many Republicans casting blame on President Joe Biden and congressional Democrats.

Inflation has swollen families’ grocery bills, rents and utility costs, among other expenses, causing hardships for many and deepening pessimism about the economy despite strong job growth and historically low unemployment.

As the election nears, Americans are increasingly taking a dim view of their finances, according to a new poll by The Associated Press-NORC Center for Public Affairs Research. Roughly 46% of people now describe their personal financial situation as poor, up from 37% in March. That sizable drop contrasts with the mostly steady readings that had lasted through the pandemic.

The September inflation numbers aren’t likely to change the Fed’s plans to keep hiking rates aggressively in an effort to wrest inflation under control. The Fed has boosted its key short-term rate by 3 percentage points since March, the fastest pace of hikes since the early 1980s. Those increases are intended to raise borrowing costs for mortgages, auto loans and business loans and cool inflation by slowing the economy.

Minutes from the Fed’s most recent meeting in late September showed that many policymakers have yet to see any progress in their fight against inflation. The officials projected that they would raise their benchmark rate by an additional 1.25 percentage points over their next two meetings in November and December. Doing so would put the Fed’s key rate at its highest level in 14 years.

Along with lower gas prices, economists expect the prices of used cars to reduce or at least restrain inflation in the coming months. Wholesale used car prices have dropped for most of this year, though the declines have yet to show up in consumer inflation data. (Used vehicle prices had soared in 2021 after factory shutdowns and supply chain shortages reduced production.)

Large retailers, too, have started offering early discounts for the holiday shopping season, after having amassed excess stockpiles of clothes, furniture and other goods earlier this year. Those price cuts might have lowered inflation in September or will do so in the coming months.

Walmart has said it will offer steep discounts on such items as toys, home goods, electronics and beauty. Target began offering holiday deals earlier this month.

Yet prices for services — particularly rents and housing costs — are remaining persistently high and will likely take much longer to come down. Health care services, education and even veterinary services are still rising rapidly in price.

“Services price increases tend to be more persistent than increases in the prices of goods,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, noted in remarks last week.

Rising rental costs are a tricky issue for the Fed. Real-time data from websites such as ApartmentList suggest that rents on new leases are starting to decline.

But the government’s measure tracks all rent payments — not just those for new leases — and most of them don’t change from month to month. Economists say it could be a year or longer before the declines in new leases feed through to government data.
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Taiwan businessman Liao Chin-chang invested in factories in mainland China’s southern city of Dongguan for the last two decades, making everything from shoes to soccer balls and chemicals. Earlier this year, however, he decided it was time to go home to Taiwan.

Liao’s decision came as global tensions and their impact on trade, and the strict policies of Chinese President Xi Jinping, made doing business in China less predictable.

For Liao, the idea of leaving China gained momentum in 2021 when random and frequent power cuts started impacting factory production.

“Since last year, we’d lose power like three or four days a week,” he told VOA’s Mandarin service in an interview. “How can factories survive without power?”

He reached the limits of his patience following a two-month-long COVID-spurred lockdown in Shanghai, China’s biggest city, with a population of 26 million. The lockdown triggered a rare and loud pushback from the public that continues to this day as China sticks to what it calls a “zero-COVID policy.”

With Beijing’s strategy of dealing with COVID — on and off lockdowns around the country — China’s economy has slowed. It is only one of the reasons that a growing number of businesses have packed up or are considering leaving the world’s second-largest economy or redistributing their operations.

Other reasons include trade friction between the United States and China, increasing state control of private enterprises and Beijing’s military threats to Taiwan. China considers Taiwan a wayward province and has not ruled out an invasion.

Stay? Or go now?

A recent survey of more than 500 Taiwan companies released by the Center for Strategic and International Studies found that 25.7 percent of firms had already moved a part of their production or sourcing out of China, and 33.2 percent were thinking about doing so. About one-third said they were not moving.

According to the survey, a majority of those leaving China, 63.1 percent, were relocating to Southeast Asia. At 51.3 percent, Taiwan was the next most popular destination for companies relocating from mainland China.

“Taiwanese companies appear to be moving their businesses at numbers far higher than in the past,” the report found.

But they are not just moving out of China; a smaller percentage of firms are moving out of Taiwan, and some of those are heading to the mainland.

Surveys conducted by the European Chamber of Commerce and the American Chamber of Commerce in Beijing and Shanghai have highlighted similar trends.

The European Chamber of Commerce quoted Denis Depoux, global managing director of management consultant company Roland Berger, as saying, “It [China] is too big and too important to scale down.” The chamber found while doing business in China has become increasingly difficult for many foreign firms, two-thirds of European companies experienced revenue increases last year.

For Liao, it all traces back to Xi, his political ambitions, and tight social and economic policies.

“How can you still seal the whole city when the economy is so crushed? Liao asked. “There are so many ships anchored in the Shanghai harbor, the shipments can’t go in or out of the city. China’s economy froze in a matter of seconds. But Xi Jinping doesn’t care. He needs stability for his enthronement.”

On October 16, China will begin a nearly week-long party congress where Xi is expected to be given an unprecedented third five-year term as party chief. Xi’s third term will mark an end to a norm that began just about the time Liao first came to China — an end to a political cycle that steadied Beijing’s relationship with the world as it opened China for business and the nation became the second-largest economy.

The long journey west

Liao moved to China in 1995, when fierce competition pushed businesspeople from Taiwan to join an army of entrepreneurs who relocated there. Liao and others were lured by the prospect of cheap labor and the special status of being from Taiwan.

“The cost of hiring one worker in Taiwan would be enough to hire 50 workers in China,” Liao said. “I had to follow the flow to China because my competitors would do so to make their prices much more appealing.”

At one point, Dongguan’s Taiwan Business Investment Association had more than 3,000 member companies, making it the largest Taiwan business association in the world.

Liao said he remembers in the early days how the Chinese government had preferential policies for Taiwan entrepreneurs and local governments even set quotas for bringing in investments from the island.

“To be honest, Taiwanese businessmen were a very special class of people. They dared not upset us,” he said.

Over the last six years, he said, he saw his product prices drop more than 70%. He said the situation worsened when the power cuts and lockdowns started. During that time, Liao was also under increasing scrutiny from authorities when he discussed the issues on social media apps in China.

In the last few years in China, Liao said, he was invited to “have tea” with the police four times after his account on China’s WeChat social media platform was censored. To “have tea” is an indirect way for the Chinese police to question, interrogate, and sometimes threaten people they consider a danger to national security or social stability.

“They told me, we know in Taiwan you can criticize the president, but here in China it’s different, so please cooperate with us,” he said.

After returning to Taiwan, he began speaking out about his experiences on social media.

Liao observed that currently, people in China are eager to make money but nobody there feels secure.

Bo Gu in VOA’s Mandarin Service contributed to this story.
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The International Monetary Fund on Tuesday downgraded its 2023 world economic outlook, citing Russia’s ongoing war against Ukraine, widespread inflationary pressures and higher interest rates boosting borrowing rates for both businesses and consumers.

The 190-nation lending agency said it expects a meager 2.7% global growth rate next year, down from the 2.9% it projected in July. The IMF left its 2022 prediction unchanged, a modest 3.2% figure that would be only slightly more than half of last year’s 6% growth.

Aside from the peak of the COVID-19 pandemic in 2020, the IMF said it is “the weakest growth profile since 2001.The worst is yet to come, and for many people, 2023 will feel like a recession.”

More than a third of the global economy will see two consecutive quarters of negative growth in the coming year, the IMF predicted.

The downturn in the IMF forecast was no surprise. Growth is slowing in the world’s two biggest economies, the United States and China, while key economies in Europe are also facing economic headwinds. Russia is coping with debilitating sanctions imposed by the U.S. and its Western allies for its war against Ukraine, now in its eighth month.

IMF Managing Director Kristalina Georgieva, speaking as the IMF and the World Bank meet in Washington, warned that the “risks of recession are rising” around the world and that the global economy is facing a “period of historic fragility.”

With economic uncertainty and rapid consumer price increases in the U.S., the IMF cut its predicted growth for the American economy to 1.6% this year, down from the July projection of 2.3%. The IMF said it is expecting only 1% U.S. growth next year.

Throughout the world, the IMF is expecting consumer prices to increase by 8.8% this year, up from 4.7% in 2021.

The IMF said it foresees 3.2% growth in China this year, down sharply from 8.1% last year. China’s business growth has been disrupted by coronavirus controls and a crackdown on excessive real estate lending. China’s economy is predicted to grow by 4.4% next year, which is still modest compared to recent Chinese advances.

The IMF said it projects economic growth of just a half percentage point in the 19-nation European bloc that uses the euro currency. Its energy prices are sharply higher as it weans itself from fuel purchases from Russia in protest of Moscow’s invasion of Ukraine.

In the U.S., the Federal Reserve has imposed sharp increases in its key benchmark interest rate five times this year to curb inflationary pressures, on the theory that higher borrowing costs for businesses and consumers will cut their purchases and dampen the increase in consumer prices.
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