Commentary Directory
- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
Jacob Hess
October 12, 2023
- US
- CPI
The US Consumer Price Index (CPI) for September showed a month-over-month (MoM) growth of 0.4% and a year-over-year (YoY) increase of 3.7%, unchanged from August. This was mostly in line with market expectations that inflation rates would remain roughly the same as the previous month. Much of the trends that were evident in August were maintained, and in general, inflation continued its slow cooling outside of energy prices.
One of the key drivers of September's inflation was the energy sector. Thanks to hot commodity markets stoked by expectations of low supplies, energy prices followed up their 5.6% MoM increase in August with a 1.5% MoM gain in September. Specifically, gas prices jumped 2.1% MoM, and electricity prices grew 1.3% MoM, both showing consistent uptrends. Natural gas prices are bucking the trend, down -1.9% MoM and -19.9% YoY. Despite the resurgence in energy costs, they are still lower than a year ago, down -0.5% YoY. Without this negative contribution to headline inflation, the CPI would be above 4%.
Food prices grew at a rate of 0.2% MoM for the fourth month out of the last five. The annual rate is now only up 3.7% YoY. A divergence exists in the details segregating food at home and food away from home prices. The food at home index was up 0.1% MoM and 2.4% YoY, while the food away from home index grew 0.4% MoM and is up 6.0% YoY. The larger increases in the latter are likely correlated with stronger services prices from restaurants and bars.
Core inflation, which excludes volatile food and energy prices, cooled down in September to 4.1% YoY from 4.3% YoY in August. The shelter index was once again a significant driver, up 0.6% MoM and 7.2% YoY, accounting for 70% of the YoY increase in core CPI. Other areas in services also showed robust growth: car insurance was up 1.3% MoM, hospital services increased 1.5% MoM, and transport services grew 0.7% MoM. Despit all of this, the annual rate of services inflation edged down -0.2 ppts to 5.7% YoY. The warmer services sector was offset by the very cool goods sector. Goods prices continued their broad deflationary streak with a negative monthly print for the fourth consecutive month. Prices fell in the used cars and trucks index (-2.5% MoM), the apparel index (-0.8% MoM), and the medical care commodities index (-0.3% MoM).
Inflation data continues to be a bit noisy with certain areas like energy and used car & vehicles driving the trends. That’s why the Fed is focused on the “super core” segment. The "super core" inflation, which excludes food, energy, shelter, and used cars, was up 0.2% MoM and 2.8% YoY in September, down from 3.2% YoY in August. The annualized rate of the last three monthly rates is just above 2.4%. The disinflationary trend is intact but hasn't really accelerated. This month's CPI data will likely leave Federal Open Market Committee (FOMC) members' opinions on the next policy step largely unchanged. The next FOMC meeting is at the end of the month, and there's still more data to come that will inform the decision... assuming the government stays open.