United States: Core inflation accelerates in October; non-core inflation falters on lower energy prices
November 15, 2017
In line with market expectations, consumer prices rose a timid 0.1% from the previous month in October as temporary effects induced by the recent hurricanes ebbed. As such, the increase was well below the 0.5% rise recorded in the previous month and reflected a 1.0% month-on-month drop in energy prices, which had soared in the aftermath of the hurricanes. Food prices were unchanged from the previous month in October. Inflation eased from a five-month high of 2.2% in September to 2.0% in October.
Core consumer prices, which exclude food and energy prices, surprised to the upside as they rose 0.2% from the previous month in October, which was above the 0.1% market analysts had predicted and the 0.1% increase recorded in the previous month. Increases were seen across-the-board, with most of the rise attributed to a pick-up in shelter prices. In addition, used vehicle prices rose for the first time since December 2016 as replacement demand following the earthquake intensified. Other components, including medical care, education and wireless phone services, also logged strong gains in October.
Because of a higher-than-expected month-on-month change in core consumer prices, core inflation trended higher for the first time since January, inching up to 1.8% in October from 1.7% in September. Core inflation is one of the measures followed most closely by the Federal Reserve to assess the extent of inflationary pressures in the economy. As such, October’s pick-up is likely to pave the way for an interest rate hike before year-end.
Author: David Ampudia, Economist