CPI: Core & Headline Nearly Flat in October

Bottom Line: Both headline and core consumer price inflation were nearly flat in October, sharply lower than expected as consumers saw lower prices for gasoline medical care services, a major core component. Used car prices fell after several months of gains. Apparel prices, very weak since the pandemic, fell further. Owner's equivalent rent, the critical component of shelter prices that accounts for nearly a third of core, rebounded slightly but remained in a downtrend. Overall, while there have been pockets of inflation related to shifting demand during the pandemic, the trend remains muted, averaging in the 1.5 - 2% on core. The CPI ROSE by just 0.04% in October, compared with market expectations for an increase of 0.10%.

• Food prices increased by 0.19% while energy prices rose by 0.1%. Prices for gasoline fell by 0.5% while prices for fuel oil increased by 0.4%, prices for electricity climbed by 1.2%, but prices for natural gas fell by 0.7%.
• Energy prices are now 9.1% BELOW their year-ago level.

Overall consumer prices are now 1.2% ABOVE their year-ago level; in October 2019, consumer prices were 1.8% ABOVE their year-ago level. The Core CPI was nearly UNCHANGED, compared with market expectations for an increase of 0.20%.

• Prices for commodities excluding food and energy commodities fell by 0.2%.
• Gains in new vehicles (+0.4%), alcoholic beverages (+0.3%), were offset by declines in apparel (-1.2%), medical care (-0.8%).
• Prices for services excluding energy services rose 0.1% with a modest increase in owner's equivalent rent (+0.2%), transportation (+0.1%), and shelter (+0.1%).

Core consumer prices are now 1.6% ABOVE their year-ago level; in October 2019, consumer prices were 2.3% ABOVE their year-ago level.