CPI: Core Inches Higher, As Clothing Prices Drop But Medical Costs Rise

Bottom Line: Core consumer price inflation edged higher by 0.16% in October as inflation in medical care services accelerated while apparel price deflation continued. Owner's Equivalent Rent, a key measure of the price of shelter, has decelerated after some volatility -- 2.2% annualized over the last three months versus 2.8% and 3.3% over the last six months and 12 months, respectively. Overall, core inflation trends are turning modestly slower again after a period of modest upward pressure. The CPI ROSE by 0.36% in October, compared with market expectations for an increase of 0.30%.

• Food prices increased by 0.24% while energy prices rose by 2.7%.
• Prices for gasoline fell by 2.4% while prices for fuel oil declined by 1.1%, and prices for natural gas fell by 0.7%. Energy prices are now 4.1% BELOW their year ago level.
• Overall consumer prices are now 1.8% ABOVE their year ago level; in October 2018, consumer prices were 2.5% ABOVE their year ago level.

The Core CPI ROSE by 0.16%, compared with market expectations for an increase of 0.20%.

• Prices for commodities excluding food and energy commodities fell by 0.1%.
• Gains in used cars & trucks (+1.3%), medical care (+1.2%), were offset by declines in apparel (-1.8%), tobacco (-0.4%).
• Prices for services excluding energy services rose 0.2% with moderate increase in medical care services (+0.9%), owner's equivalent rent (+0.2%), and transportation (+0.1%).
• Core consumer prices are now 2.3% ABOVE their year ago level; in October 2018, consumer prices were 2.2% ABOVE their year ago level.