Consumer Price Index Rises Slightly

Consumer prices are showing some lift but not wide pressure nor accelerating pressure, at least yet. The CPI rose 0.2 percent in October with the core also up 0.2 percent, both hitting expectations. Year-on-year, the CPI is up only 0.2 percent, which however is up from zero in September, but the core rate is unchanged at plus 1.9 percent which is right at the Fed's general 2 percent goal.

Medical care ended a run of quiet months with a 0.7 percent jump in the month, taking the year-on-year rate to plus 3.0 percent. Education & communication rose 0.3 percent for a second month though this year-on-year rate is only at plus 1.0 percent. Vacation prices are going up with airfares up a very sharp 1.5 percent and shelter away from home up 0.8 percent. But housing costs all together rose only 0.2 percent, down 1 tenth from September's 0.3 percent gain with the year-on-year rate a manageable plus 2.1 percent.

Energy prices rose 0.3 percent in the month following steep plunges in the prior two months. Year-on-year, energy is down 17 percent with gasoline alone down 28 percent. Food prices are soft, up only 0.1 percent in October with the year-on-year rate at only plus 1.6 percent. Apparel, down 0.8 percent for a year-on-year minus 1.9 percent, is a direct reflection of low import prices.

What pressure there is in this report is balanced against still declining import prices and weak commodity prices and weak wholesale prices. Of all the inflation reports, this, the most important, is showing the most pressure, but not enough to be not decisive for the December FOMC.

Recent History Of This Indicator:
Consumer prices at the headline level have not been showing any pressure at all, having fallen for two straight months in declines tied to low energy costs and low costs for imports, the latter reflecting the strength of the dollar. But the Econoday consensus is calling for a 0.2 percent rebound in October. Shelter prices have been showing some pressure and have been pushing up the core rate which is expected to also increase 0.2 percent in what would be a tangible gain for this closely watched reading.