The October Consumer Price Index (CPI) showed that inflation moderated once again last month, but rising costs for key goods and services continue to pressure peoples' wallets.
For the record, headline October CPI increased 0.2% month over month – or the same rate seen in each of the previous three months – to match economists' expectations.
On an annual basis, headline CPI rose 2.6%, according to the Bureau of Labor Statistics. Although inflation accelerated on a year-over-year basis, the print comported with market forecasts.
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Core CPI, which excludes food and energy costs and is considered a better indicator of future prices, also matched estimates. The gauge increased 0.3% in October, or the same rate seen in August and September. Annual core CPI advanced 3.3% to match consensus expectations.
"While shelter and used car prices accelerated compared to the prior month, the pace of increase for transportation and medical services slowed down," said Dawit Kebede, senior economist at America's Credit Unions. "The monthly rise for core prices (excluding food and energy) was driven by services, as commodity prices remained flat in October."
The bottom line from the October CPI report is that prices are still rising faster than consumers would like.
Between 2000 and 2020, annual inflation in the U.S. averaged just 2.1%. (Recall that the Federal Reserve's inflation target is 2%.) Perhaps we didn't appreciate it enough at the time, but the first two decades of the 21st century were a sort of Goldilocks era for inflation: not too fast and not too slow.
Just have a look at some of the subcategories in the latest CPI report to see how much things have changed. Below we highlight the goods and services that are weighing most heavily on folks' finances.
Rising prices: where inflation is hitting hardest
Housing costs, or the shelter index, helped drive inflation last month, per the BLS. Indeed, shelter costs rose 0.4% month-to-month in October after increasing 0.2% the prior month. Year-over-year, shelter popped 4.9%.
Owners' equivalent rent (OER), a price no one pays that serves as a proxy for housing, "has been particularly volatile in recent months," notes Jan Hatzius, chief economist at Goldman Sachs.
Used cars and trucks also surprised to the upside, with prices rising 2.7% in October vs a 0.3% gain in September.
"The volatile airfares component rose by 3.2%," Hatzius adds, "while medical care services inflation was also firm, at 0.4%, and recreation services prices rose 1.2%."
In better news, "the pace of increase for transportation and medical services slowed down," says America's Credit Unions Senior Economist Dawit Kebede. "The monthly rise for core prices (excluding food and energy) was driven by services, as commodity prices remained flat in October."
As for food inflation, prices for food at home, such as groceries, increased 0.2% month-to-month in October, down from a 0.4% increase in September. Meanwhile, the index for food consumed away from home decelerated to a 0.2% gain last month from 0.3% in September.
Over the past year, food at home prices rose 2.1%, while food away from home became 3.8% more dear.
In better news for consumers, apparel prices declined 1.5% on a monthly basis, car insurance prices ticked down 0.1% and communication costs fell 0.6%, Goldman Sachs notes.
While inflationary pressures persist in key categories such as housing, transportation and electricity, the most significant relief has come from lower oil and gas prices, notes Ben Vaske, senior investment strategist at Orion Portfolio Solutions.
"Discussions around 'reflation' have resurfaced and expected to continue going forward, driven by anticipation of Trump’s proposed economic policies," Vaske writes.
Energy prices were unchanged in October after declining 1.9% the prior month. Year-over-year, energy costs fell 4.9% in October.
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