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CPI: Core Prices Moderating

October 18, 2016
Bottom Line: Consumer prices are now 1.5% above their year ago level. Meanwhile, core consumer prices rose modestly and are 2.2% above their year ago level. Owners' Equivalent Rent (a major component of CPI that is an estimate of the cost of shelter) rose by 0.4%, 3.4% year-over-year. But flat medical care and transportation prices and lower apparel and auto prices kept core price acceleration modestly lower than expected in September. Overall inflationary pressures at the consumer level still remain modest but are rising compared to year-ago levels. That said, the last three months of data suggest the modest acceleration over the last year, especially at the core level, is moderating.

The CPI ROSE by 0.3% in September, consisten with market expectations for an increase of 0.3%.

Food prices increased by 0.02% while energy prices rose by 2.9%. Prices for gasoline rose by 5.8% while prices for fuel oil increased by 1.5%, prices for electricity climbed by 0.7%, and prices for natural gas rose by 0.8%. Energy prices are now 2.9% BELOW their year ago level. Overall consumer prices are now 1.5% ABOVE their year ago level; in September 2015, consumer prices were UNCHANGED relative to their year ago level.

The Core CPI ROSE by 0.1%, compared with market expectations for an increase of 0.2%. Prices for commodities excluding food and energy commodities fell by 0.1%. Gains in medical care (+0.6%), tobacco (+0.4%), were offset by declines in apparel (-0.7%), used cars & trucks (-0.3%). Prices for services excluding energy services rose 0.2% with modest increase in owner's equivalent rent (+0.4%), shelter (+0.4%), and medical care services (+0.0%). Core consumer prices are now 2.2% ABOVE their year ago level; in September 2015, consumer prices were 1.9% ABOVE their year ago level.