October CPI
Updated 19-Nov-09 19:26 ET
Highlights
- Headline CPI rose 0.3% in October, slightly higher than consensus expectations of 0.2%.
- Core CPI prices increased 0.2%, also slightly higher than consensus expectations of 0.1%. The difference between core and headline price growth was mainly due to energy prices rising 1.5% in the month. Food prices rose a very modest 0.1%.
- Other than vehicle prices, housing prices increased 0.1% but it was mostly due to higher fuel oil prices (6.0%); apparel prices declined 0.4%; medical care prices rose 0.2% after increasing 0.4% in September; recreation prices declined 0.4%; education and communication prices rose 0.2%; and other goods and services prices increased 0.3% as miscellaneous personal service prices increased 0.9%.
Key Factors
- The increase in CPI wasn't due to a broad based increase in prices but from a shock in new and used car prices. Every October the CPI is adjusted to account for changes in new model year pricing. This year, the CPI showed new car prices rising 1.6%.
- What's odd is that yesterday's PPI report showed producer prices for new cars fell 0.5% and light truck prices declined 5.2%. On the surface, the rise in consumer prices represents a profit taking move on the part of the auto manufacturers. However, it's very likely that dealers are going to try to woo new car buyers by advertising a new initial cost and then slashing prices in the upcoming months in order to show that buyers are getting a deal.
- Used car prices increased 3.4% in October. The used car market is still feeling the effects from the Cash for Clunkers stimulus program. Since the clunkers were required to be destroyed, the supply of cheap/old vehicles is extremely low. Consumers are either forced to pay more money for these cars or look for more expensive alternatives.
Big Picture
- Inflation trends have weakened. The decline in energy prices after the last summer's spike has taken CPI down to -2.1% on a year-over-year basis as of July 2009 data. Energy prices have again increased, yet the core rate should ease due to weak demand. Low inflation rates are likely to continue through 2009 although continued month-over-month deflation is not likely.
| Category |
OCT |
SEP |
AUG |
JUL |
JUN |
| All Items |
0.3% |
0.2% |
0.4% |
0.0% |
0.7% |
| Food and Beverages |
0.1% |
-0.1% |
0.1% |
-0.2% |
0.1% |
| Housing |
0.1% |
0.0% |
0.1% |
-0.2% |
0.0% |
| Equivalent Rent |
0.0% |
-0.1% |
0.1% |
0.0% |
0.1% |
| Apparel |
-0.4% |
0.1% |
-0.1% |
0.6% |
0.7% |
| Transportation |
1.4% |
0.8% |
2.3% |
0.2% |
4.2% |
| Vehicles |
1.7% |
0.5% |
-0.4% |
0.3% |
0.4% |
| Motor Fuel |
1.6% |
1.1% |
8.8% |
-0.4% |
17.2% |
| Medical Care |
0.2% |
0.4% |
0.3% |
0.2% |
0.2% |
| Educ and Commun |
0.2% |
0.1% |
0.2% |
0.3% |
0.2% |
| Special Indices |
|
|
|
|
|
| Core |
0.2% |
0.2% |
0.1% |
0.1% |
0.2% |
| Energy |
1.5% |
0.6% |
4.6% |
-0.4% |
7.4% |
| Services |
0.1% |
0.1% |
0.2% |
0.0% |
0.1% |
