Consumer Prices Still Subdued

Energy prices which are now sliding lifted what is yet another subdued consumer inflation report, this time for October where the headline, at a moderate and as-expected 0.3 percent increase, overstates the pressure. Energy jumped 2.4 percent in October led by a 3.0 percent rise in gasoline prices which appear certain to come down in the November report given the ongoing tumble in the price of oil. The core rate, which excludes energy and also food, came in as expected at 0.2 percent.

Housing is the dominant component in the consumer price report and here price pressures are also moderate, especially for rents which rose only 0.2 percent and also for homeowners where the reading for owners' equivalent rent rose 0.3 percent. Medical services are also an important component and here the story is the same, up only 0.2 percent with both physician services and hospital services unchanged in the month.

Food prices continue to be very subdued, down 0.1 percent while apparel, which did jump in September, rose only 0.1 percent in October. Prices of new vehicles fell 0.2 percent for a second straight decline though prices of used vehicles did jump 2.6 percent which fails to reverse, however, a 3.0 percent monthly drop in September.

Year-on-year rates show an as-expected 2.5 percent overall rate with the core rate up a lower-than-expected 2.1 percent. Energy is up 8.9 percent on the year but, again, this looks to be moving lower for the next report. Food is up only 1.2 percent year-on-year with medical services up only 1.9 percent.

Housing does show a little yearly pressure at a 3.2 percent gain overall which, however, is the lowest reading since February this year. Today's report and the outlook for the next report for November may increase criticism of the Federal Reserve which is raising interest rates to protect against the risk of unwanted inflation. Yet the biggest question for inflation isn't measured directly in this report and that's wage pressure where risks, given the rising level of job openings and declining number of unemployed, do point to a turn higher.