“To be sure, the weakness in inflation is exaggerated by the last year’s sharp drop in oil prices”.
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CPI stayed below zero as small rises in the prices of clothing and footwear last month were offset by ongoing falls in food and drink, while the effect of the Government’s move to triple university tuition fees, which came into effect in 2012, are also finally dropping out of the annual comparison. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report. From a year ago overall CPI has increased 0.2%, which is very low, yet without energy and food considered, prices have increased 1.9%.
“The core has been pretty solid”, said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in Stamford, Conn., who correctly projected the gain in core prices. Unexpectedly, total industrial production declined 0.2%, as demand for electricity reduced due to warm weather.
The unemployment rate has improved to a healthy 5 per cent, compared to 5.7 per cent a year ago. Given the full implementation of the Affordable Care Act, it is quite ironic that healthcare costs are rising faster than the normal rate of inflation at the consumer level. It is the eighth month in a row where inflation has sat between -0.1% and 0.1%.
With underlying inflation edging higher and energy deflation about to wind down, the Fed likely will see today’s CPI report as another reason to begin raising interest rates at the December meeting. Over the past 12 months the index increased 1.2 percent.
The Consumer Price Index increased by 0.2% for October as energy price declines abated.
US consumer prices increased in October after two straight months of declines as the cost of goods and services rose, signs of firming inflation that further support expectations that the Federal Reserve will raise interest rates next month.
While weak global growth and a strong dollar have held down the cost of commodities such as fuel, Americans are paying more for services including rents and medical care. Shelter increased 0.3% and is up 3.2% for the year.
Oxford Economics lead economist Martin Beck said: “We think CPI inflation is likely to have run at a similar negative rate in October”.
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“October’s inflation numbers are just the sort of confirmation the Fed is looking for that domestic strength is generating inflationary pressures”, said Leslie Preston, an economist at TD Bank. The October index for cakes, cupcakes and cookies was 282.1, up 1% from September and up 2.7% from October 2014.
