US Consumer Inflation Surprisingly Soft in October

Highlights

• October’s CPI remained unchanged, defying forecasts.
• Headline CPI: 0.0% (expected 0.1%), Core CPI: 0.2% (expected 0.3%).
• The softening of US consumer inflation challenges expectations and raises questions.

Overview

The Consumer Price Index (CPI) exhibited stability in October, following a 0.4 percent increase in September, according to the U.S. Bureau of Labor Statistics.

Over the past year, the all items index saw a 3.2 percent increase before seasonal adjustment. Headline CPI was 0.0% in October, lower than the 0.1% forecast. Core CPI was 0.2% in October, lower than the 0.3% forecast.

Shelter on the Rise: The index for shelter continued its upward trajectory in October, effectively counterbalancing a decline in the gasoline index and resulting in a month-over-month stabilization in the seasonally adjusted index. Meanwhile, the energy index experienced a 2.5 percent drop, primarily driven by a significant 5.0-percent decrease in the gasoline index, which more than offset increases in other energy component indexes.

Food Prices: In October, the food index saw a 0.3 percent increase, following a 0.2 percent rise in September. The index for food at home increased by 0.3 percent during the month, while the index for food away from home rose by 0.4 percent.

Core Inflation: The index for all items excluding food and energy exhibited a 0.2 percent rise in October, slightly slower than the 0.3 percent increase observed in September. Notable increases in October were observed in indexes related to rent, owners’ equivalent rent, motor vehicle insurance, medical care, recreation, and personal care. Conversely, the indexes for lodging away from home, used cars and trucks, communication, and airline fares witnessed declines during the month.

Yearly Trends: Looking at the broader picture, the all items index recorded a 3.2 percent increase over the 12 months ending in October, showing a moderation compared to the 3.7-percent increase in the 12 months ending in September. The all items excluding food and energy index experienced a 4.0 percent rise over the last 12 months, marking its smallest 12-month change since September 2021. Furthermore, the energy index registered a 4.5 percent decrease for the 12 months ending in October, while the food index saw a 3.3 percent increase over the past year.

In conclusion, the October 2023 Consumer Price Index reflects a stabilizing trend in overall prices, with particular highlights on housing costs and food prices. While some core elements witnessed slight moderation, the yearly trends show a more measured inflationary pace compared to recent months.