Another month another inflation report that is slightly worse than expected. While inflation did fall year-over-year, it did not fall as much as expected, according to the Bureau of Labor Statistics Consumer Price Index.
- Y-O-Y: The Consumer Price Index for All Urban Consumers increased 8.2%, this is down from 8.3% in August but is higher than economist predictions of 8.1%.
- M-O-M: Consumer prices rose 0.4% which is higher than August’s 0.1% and higher than the 0.2% economists projected.
Core. The core index, all items less food and energy, was up 0.6% for the second month in a row and is now up 6.6% year-over-year. This is higher than August’s 6.3% and higher than economist predictions of 6.5%.
Drivers Seat. Energy continues to be the biggest driver of inflation even with a 2.1% drop month-over-month. Energy prices were up 19.8% year-over-year in September which is down from the 23.8% reported in August.
- Food prices were up 0.8% for the month matching August’s increase and year-over-year prices are now up 11.2%, this is actually down slightly from 11.2% in August.
Housing Costs. The bad news going forward is the climbing shelter costs which make up 1/3 of the index. In September, the monthly increase was 0.7% for the second month in a row and is now up 6.6% which is the highest on the record. Making matter worse Reade Pickett reports that “Bloomberg Economics doesn’t expect year-over-year rates for the major shelter components to peak until well into the second half of next year.”
It Gets Worse. Some people, mostly Democrat operatives because they are trying to hold on to power, are trying to argue that well if you remove food, energy, shelter, and used car prices things aren’t that bad. Even that’s not true. The core index minus shelter and used cars is 7.4%.
BOTTOM LINE: Two conclusions today. Neither of which are mine…
- Feds Gonna Keep Hiking. Neil Irwin was straight to the point on Twitter about what this means for the Fed Funds Rate. “To state the obvious, a second straight month of 0.6% core CPI inflation is not remotely what the Fed wants to see. Looks like 75bps it is in early November.”
- Could Be Worse. If you are a Democrat you literally have only one argument right now when voters ask about prices. Jason Furman laid it out on Twitter, “If it makes Americans feel any better inflation is higher in the euro area than the US (+10.0% vs. 8.8% on a comparable basis).” However, even that has some problems as Furman notes “a lot of that is natural gas as core inflation remains much higher in the United States.”