October was a merciful month for consumers, who broadly saw prices remain flat compared to September, providing further evidence that inflation is moderating.
The U.S. Department of Labor said Thursday that October’s consumer price index (CPI), which measures the change in prices on a variety of consumer goods and services, came in flat compared to September on a seasonally adjusted basis, and up just 3.2% month-over-month. Meanwhile, “core” CPI—this metric backs out food and energy costs, which are more volatile than the other costs tracked by the Labor Department—was up just 0.2% MoM and 4.0% YoY.
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All of these figures came in less than expected. A quick look at the numbers compared to estimates from economists surveyed by Dow Jones:
- MoM CPI: No change (vs. +0.1% est.)
- YoY CPI: +3.2% (vs. +3.3% est.)
- MoM Core CPI: +0.2% (vs. +0.3% est.)
- YoY Core CPI: +4.0% (vs. +4.1% est.)
The biggest decline came in gasoline prices, which were down 5% month-over-month. Used cars and trucks (-0.8%) and new vehicles (-0.1%) also experienced minor drops.
Utility (piped) gas service prices rose 1.2% in October, with transportation services (+0.8%) and medical care commodities among areas where prices still ticked higher.
Here’s what several experts have to say about October’s CPI numbers and what they mean for consumers, the Federal Reserve’s future actions, and more:
“Overall, this print does not derail our expectation that the Fed will keep rates steady for the remainder of the year, and in fact confirms our expectation. Why? Because financial conditions are sufficiently restrictive and inflation is broadly heading in the right direction, albeit slowly. The key components of inflation—core goods and core services ex-shelter—continue to weaken. Core services increased +0.34% MoM; taking out shelter prices, services increased 0.30%. ‘Supercore’ inflation, which is core services CPI excluding shelter and a metric the Fed watches closely, remains lower than the levels we saw earlier this year. All in all, the current trajectory of inflation shows that higher rates are actively working to slow price growth, thus supporting the case for keeping rates at their current level for longer.”
—Gargi Chaudhuri, Head of iShares Investment Strategy, Americas
“Today’s core CPI print was below expectations. The number was expected to be higher due in part to residual seasonality and new source data that was incorporated in the health insurance calculation. However, the important indicator on inflation in focus was OER. Big reversion from upside miss on shelter last month to a meaningful deceleration in shelter. This should solidify the Fed on hold in December.”
—Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management
“After a summer panic in interest rates and oil prices, the inflation narrative is quickly unwinding. Today’s CPI showed more improvement on key areas like shelter and car prices. It’s the latest item in a flood of good news hitting the market in November. A soft landing and permanent Fed pause look increasingly likely, which would lay the groundwork for a strong year end. Santa could be coming to town.”
—David Russell, Global Head of Market Strategy at TradeStation
“Core CPI came in below expectations with prices lower across the board. This is encouraging for markets and suggests a December hike is off the table. Consumption should hold up into the holiday season, aided by lower prices at the pump and a downtick in consumer inflation expectations, per the latest Fed survey. For now, positive seasonality and short covering continues to support risk-on conditions, underpinned by the pullback in Treasury yields. Markets continue to position for the end of the Fed’s rate hike cycle.”
—Damanick Dantes, Portfolio Strategist, Global X