October 2015 CPI Annual Inflation Rate Is Only 0.2%

by Doug Short and Steven Hansen

According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 0.2% – almost no inflation. The year-over-year core inflation (excludes energy and food) rate remained unchanged at 1.9 %, and continues to be slightly under the targets set by the Federal Reserve.

The market expected (from Bloomberg):

month over month change Consensus Range Consensus Actual CPI-U -0.1 % to 0.2 % +0.2 % +0.2 % CPI-U less food and energy 0.1 % to 0.3 % +0.2 % +0.2 %

As a generalization – inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy – and cannot be used as a economic indicator.

There were few major influences on this month’s CPI. Energy was mixed.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.2 percent before seasonal adjustment.

The indexes for food, energy, and all items less food and energy all increased modestly in October. The food index, which increased 0.4 percent in September, rose 0.1 percent in October, with four of the six major grocery store food group indexes rising. The energy index, which declined in August and September, advanced 0.3 percent in October; major energy component indexes were mixed.

The index for all items less food and energy rose 0.2 percent in October, the same increase as in September. Advances in the indexes for shelter and medical care were the largest contributors to the increase, with the indexes for personal care, airline fares, recreation, alcoholic beverages, and tobacco also rising. In contrast, the indexes for apparel, new vehicles, household furnishings and operations, and used cars and trucks all declined in October.

The all items index rose 0.2 percent over the last 12 months. The 12-month change has been between negative 0.2 percent and positive 0.2 percent since January. The food index has increased 1.6 percent over the past year, and the index for all items less food and energy has risen 1.9 percent. These advances have been mostly offset by a 17.1 percent decline in the energy index.