CPI as expected

Core consumer prices, excluding food and energy, rose +.2% MoM in September. This was as expected, and marks the eighth month in a row that core inflation has risen at +.2% or less. Unrounded core actually rose +.22%. Headline CPI inflation rose more than expected versus August, rising +.3%MoM (consensus +.2%, prior -.1%). Versus a year ago, headline inflation popped in September to +2.8% YoY, versus +2% YoY in August, while core inflation held steady at +2.1% YoY.

Energy price gains re-emerged in September, growing +.3% MoM (+5.3% YoY) after declining the prior three months. Gas prices rose +.4% MoM (+8.7% YoY), and are likely to rise further in the next few months as oil hits new highs. Food costs rose an even more substantial +.5% MoM (+4.5% YoY) in September, which was higher than expected.

Owners equivalent rent also rose +.3% MoM (+2.9% YoY), for the largest gain in many months. Actual tenant rent increases have been slowing though. Only two categories saw declines last month - personal computer prices fell -.7% MoM (-10% YoY) and vehicles fell -.2% MoM (-1.4% YoY). Medical care and education costs slowed their gains, rising +.3% MoM and +.1% MoM last month.

Sixty percent of the CPI index covers services, which rose +.3% MoM and +3.2% YoY. Services include everything from movies to airline flights and dry cleaners.

This is the month each year that the government gives new cost of living adjustments for their disbursements tied to COLA, such as social security. They compare third quarter 2006 to third quarter 2007 prices. The 2007 adjustment is +2.3%, down from an increase of +3.3% in 2006 and +4.1% in 2005. The last time the increase was this small was in 2003 when it rose +2.1%. The highest increase in the past thirty years was the +14.3% increase in 1980 when short term borrowing rates briefly reached 20%.