Headline Consumer Price Index Remained Unchanged in October

November 20, 2014

by Doug Short

The Bureau of Labor Statistics released the October CPI data this morning. Year-over-year unadjusted Headline CPI came in at 1.66% (rounded to 1.7%), unchanged from the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.81% (rounded to 1.8%), slightly higher than the previous month's 1.73% (rounded to 1.7%). The non-seasonally adjusted month-over-month Headline number was down 0.25% (-0.25%), and the Core number was up 0.24%. On a seasonally-adjusted basis, the all items index was unchanged.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted data monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged 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 1.7 percent before seasonal adjustment.

Gasoline and other energy indexes declined, offsetting increases in shelter and an array of other indexes to leave the seasonally adjusted all items index unchanged. The gasoline index fell for the fourth month in a row, declining 3.0 percent, and the indexes for natural gas and fuel oil also decreased. The food index rose slightly in October, with major grocery store food groups mixed.

The index for all items less food and energy increased 0.2 percent in October. Besides the shelter index, airline fares, household furnishings and operations, medical care, recreation, personal care, tobacco, and new vehicles were among the indexes that increased. The indexes for used cars and trucks and for apparel declined in October.

The all items index increased 1.7 percent over the last 12 months, the same increase as for the 12 months ending September. The index for all items less food and energy increased 1.8 percent over the span, and the food index rose 3.1 percent. In contrast, the energy index declined 1.6 percent over the last 12 months.   [More…]

Investing.com was looking for no change inHeadline CPI and a 0.2% increase for Core CPI. Year-over-year forecasts were 1.7% for both Headline and 1.8% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. I've highlighted 2 to 2.5 percent range, which the Federal Reserve currently targets for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

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The next chart shows both series since 1957, which was the first time the government began tracking the core inflation metric.

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In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) are in place.

Federal Reserve policy, which has historically focused on core inflation as measured by the core PCE Price Index, will see that the more familiar core CPI has reached the PCE the target range of 2 to 2.5 percent.

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