| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.1% | 0.0% to 0.2% | 0.2% | 0.2% |
| CPI - Y/Y | 2.3% | 2.3% to 2.4% | 2.4% | 2.5% |
| Ex-Food & Energy- M/M | 0.2% | 0.2% to 0.3% | 0.3% | 0.3% |
| Ex-Food & Energy- Y/Y | 3.2% | 3.1% to 3.2% | 3.3% | 3.2% |
Highlights
The September consumer price index (CPI) is up 0.2 percent month-over-month and up 2.4 percent year-over-year. The increases are a tick above the consensus in the Econoday survey of forecasters of up 0.1 percent and up 2.3 percent, respectively. The September core CPI is up 0.3 percent month-over-month and up 3.3 percent year-over-year. These are also a tenth above the Econoday survey consensus of up 0.2 percent and up 3.2 percent, respectively.
The slightly above expectations headlines for September do not change the outlook for Fed monetary policy. The year-over-year pace of increases to the all-items CPI are still on the decline. The year-over-year increase in September is below the 2.5 percent in August. On the other hand, the core CPI is a tad higher than the up 3.2 percent year-over-year in August, and has been essentially unchanged for the past four months. Persistent upward price pressures at the core level continue to be driven by services while commodities costs are on the decline.
Food and beverage prices are up 0.4 percent in September from August and up 2.2 percent year-over-year. Prices are up 0.8 percent for meats, poultry, fish, and eggs and up 0.9 percent for fruits and vegetables.
Energy prices are down 1.9 percent in September and down 6.8 percent from a year ago. Much of the decrease is from a 4.1 percent decline in gasoline prices.
Sources of upward price pressure at the core level include increasing medical care costs at up 0.4 percent in September, although prescription drug prices are down 0.5 percent. Insurance prices are also increasing. Motor vehicle insurance is up 1.2 percent in September and health insurance is up 0.4 percent. The introduction of fall merchandise may be behind the 1.1 percent increase in apparel costs.
Shelter costs which account for a little more than 1/3 of the CPI basket are up 0.2 percent in September and up 4.9 percent from September 2023. Rents and owners' equivalent rate are both up 0.3 percent from the prior month. Shelter costs are coming down incrementally on a year-over-year basis with August at up 4.8 percent and July at up 4.9 percent. However it remains a major source of inflation.
Commodities prices are down 0.2 percent in September from August and down 1.3 percent year-over-year. Services prices are up 0.4 percent in September from the prior month and up 4.7 percent year-over-year. The special aggregate CPI for services excluding rent of shelter is up 0.6 percent in September month-over-month and up 4.4 percent from a year ago.
The slightly above expectations headlines for September do not change the outlook for Fed monetary policy. The year-over-year pace of increases to the all-items CPI are still on the decline. The year-over-year increase in September is below the 2.5 percent in August. On the other hand, the core CPI is a tad higher than the up 3.2 percent year-over-year in August, and has been essentially unchanged for the past four months. Persistent upward price pressures at the core level continue to be driven by services while commodities costs are on the decline.
Food and beverage prices are up 0.4 percent in September from August and up 2.2 percent year-over-year. Prices are up 0.8 percent for meats, poultry, fish, and eggs and up 0.9 percent for fruits and vegetables.
Energy prices are down 1.9 percent in September and down 6.8 percent from a year ago. Much of the decrease is from a 4.1 percent decline in gasoline prices.
Sources of upward price pressure at the core level include increasing medical care costs at up 0.4 percent in September, although prescription drug prices are down 0.5 percent. Insurance prices are also increasing. Motor vehicle insurance is up 1.2 percent in September and health insurance is up 0.4 percent. The introduction of fall merchandise may be behind the 1.1 percent increase in apparel costs.
Shelter costs which account for a little more than 1/3 of the CPI basket are up 0.2 percent in September and up 4.9 percent from September 2023. Rents and owners' equivalent rate are both up 0.3 percent from the prior month. Shelter costs are coming down incrementally on a year-over-year basis with August at up 4.8 percent and July at up 4.9 percent. However it remains a major source of inflation.
Commodities prices are down 0.2 percent in September from August and down 1.3 percent year-over-year. Services prices are up 0.4 percent in September from the prior month and up 4.7 percent year-over-year. The special aggregate CPI for services excluding rent of shelter is up 0.6 percent in September month-over-month and up 4.4 percent from a year ago.
Market Consensus Before Announcement
US CPI is expected to rise 0.1 percent on the month in September and 2.3 percent on the year, slower than 0.2 percent and 2.5 percent seen the previous month.
Definition
The CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
Description
The consumer price index is the most widely followed monthly indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
