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CPI: Lagged Home Price Impact + Jump in Medical Care

October 13, 2022
Bottom Line: CPI rose even more than expected in September. The core CPI was up 0.6%, two-tenths more than expected, as Owner's Equivalent Rent (OER), a key measure of shelter prices and nearly a third of core CPI, jumped 0.8%. The OER tends to lag home price gains by more than a year -- and while the magnitude of the jump was higher than expected, the lagged impact was a known factor. Medical care services prices, the most significant contributor to volatility before the pandemic but quiet until recently, jumped nearly 1%, the second month of record increases. Finally, used car prices, a significant source of inflation in the first year of the pandemic, fell. Overall, inflation remains stubbornly high. Medical care services are a big concern for the trend, potentially offsetting some of the deceleration in OER that should come later this year and in early 2023 based on historic lags with home prices.
ROSE by 0.39% in September, compared with market expectations for an increase of 0.20%.
  • Food prices increased by 0.78% while energy prices fell by 2.1%.  
  • Prices for gasoline fell by 4.9% while prices for fuel oil declined by 2.8%, prices for electricity climbed by 0.4%, and prices for natural gas rose by 2.9%.  
  • Energy prices are now 19.9% ABOVE their year-ago level.  
Overall consumer prices are now 8.2% ABOVE their year-ago level; in September 2021, consumer prices were 5.4% ABOVE their year-ago level.
The Core CPI ROSE by 0.58%, compared with market expectations for an increase of 0.40%.
  • Prices for commodities excluding food and energy commodities rose by 0.0%.
  • Gains in new vehicles (+0.7%) were partially offset by declines in used cars & trucks (-1.1%), and apparel (-0.3%).
  • Prices for services excluding energy services rose 0.8% with a moderate increase in transportation (+1.9%), medical care services (+1.0%), and owner's equivalent rent (+0.8%).
Core consumer prices are now 6.7% ABOVE their year-ago level; in September 2021, consumer prices were 4.0% ABOVE their year-ago level.
Article by Contingent Macro