US CPI rises slightly in September

The Urban All Consumer Price Index (CPI-U) rose 0.2 percent on a seasonally adjusted basis, the same rise as in August and July, the US Bureau of Labor Statistics reported today. Over the past twelve months, the all-item index has risen 2.4 percent before the seasonal adjustment.

The shelter index rose 0.2 percent in September, and the food index rose 0.4 percent. Together, these two indicators contributed more than 75 per cent of the monthly increase for all items. The home food index rose 0.4 percent in September and the out-of-home food index rose 0.3 percent over the month. The energy index fell 1.9 percent over the month, after falling 0.8 percent in the previous month.

The index of all items except food and energy rose 0.3 percent in September, as it did in the previous month. Indices that rose in September include shelter, motor vehicle insurance, medical care, clothing, and airline ticket prices. Entertainment and communications indices were among those that fell during the month.

The all-item index rose 2.4 percent over the twelve months ended September, the smallest 12-month increase since February 2021. The index of all items except food and energy has increased by 3.3 percent over the past twelve months.

The energy index fell 6.8 percent over the twelve months ending in September. The food index has risen 2.3 percent over the past year.

The food index rose 0.4 percent in September, after rising 0.1 percent in August. The home food index also rose 0.4 percent in September. Five of the six major grocery store food group indices rose during the month. The meat, poultry, fish and eggs index rose 0.8 percent in September

Overview of the core consumer price index (CPI) and its impact

The month-to-month core consumer price index (CPI) (m/m) is an important economic indicator that measures the change in the prices of a basket of consumer goods and services, excluding food and energy prices. The following is a detailed overview:

1. Definition

Basic CPI: The core CPI focuses on the prices of less volatile goods and services, with the exception of food and energy categories which often fluctuate. This provides a clearer picture of underlying inflation trends.

Month-to-month measurement: The month-to-month change in the core CPI reflects the percentage change in prices from month to month, allowing analysts to monitor short-term inflation trends.

2. Importance

Inflation Measure: The core consumer price index is a key measure of inflation and is closely monitored by economists, policymakers, and investors. It helps assess the cost of living and purchasing power of consumers.

Monetary Policy Tool: Central banks, such as the Federal Reserve, use the core consumer price index to inform monetary policy decisions. A higher core CPI may raise interest rates to control inflation, while a recession or lower core CPI may lead to more accommodative policies.

3. Ingredients

Items covered: The core CPI includes categories such as:

Housing (rent, equivalent rent to landlords)

apparel

Medical care

Transportation (excluding fuel)

Entertainment

Excluded items: Food and energy prices are excluded due to their volatility, which could distort the overall inflation picture.

4. Market Impact

Currency Markets: A higher-than-expected core CPI could strengthen the currency (e.g., the US dollar), as this could lead to expected interest rate hikes.

Stock Markets: A rise in the core consumer price index could increase volatility in stock markets, as investors adjust their expectations on interest rates and economic growth.

Indicators related to the core consumer price index (CPI) and their impact

Underlying CPI trends are influenced and correlated with them, providing a comprehensive view of the health of the economy. Here are some key indicators that are often associated with underlying CPI trends:

1. Employment Data

Unemployment rate: A decreasing unemployment rate usually indicates a stronger labor market, which can lead to increased consumer spending and upward price pressure, affecting the core consumer price index.

Wage growth: Higher wages can contribute to an increase in consumer purchasing power, which can lead to an increase in demand for goods and services, and thus a rise in the core consumer price index.

2. Consumer Confidence Index (CCI))

Consumer sentiment: High consumer confidence is often associated with increased spending, which can lead to increased demand and higher prices, affecting the core CPI. Conversely, low confidence could discourage spending and keep inflation under control.

3. Gross Domestic Product (GDP))

Economic growth: Strong GDP growth is often associated with a rise in the core consumer price index, as increased economic activity can lead to increased demand for goods and services. Conversely, weak GDP growth may indicate lower inflationary pressures.

4. Producer Price Index (PPI))

Wholesale prices: The PPI measures price changes at the wholesale level. An increase in the PPI is often preceded by increases in the core CPI, as higher costs for producers can eventually pass on to consumers.

5. Retail Sales

Consumer spending: Retail sales data provides insight into consumer spending trends. Increased retail sales are often associated with a rise in the core CPI, as increased demand can lead to upward price pressures.

6. Interest Rates

Impact of monetary policy: The Fed and other central banks are adjusting interest rates in response to inflation trends. If the core CPI rises, it could tighten monetary policy