There’s finally some positive news on the inflation front – the consumer price index eased last month.
Prices were up 7.7% in October from the year before – still uncomfortably high, but encouragingly on the decline. Core inflation, stripped of volatile food and energy prices, is up 6.3% from the year before. After reaching a decades-long high last month, it should be a comfort to both the Federal Reserve and consumers to see that ticking down.
We have been following the reversing position of services and durable good inflation – this trend continued in October. The bout of inflation that began with elevated energy prices and quickly seeped into goods has now soundly invaded services prices. Durable goods were up 4.76% from the year before, while services prices were up 7.24%.
Increases in the shelter index made up half of the monthly increase (+0.4%). Rent prices are up 6.99% year-over-year – uncomfortably high for consumers fitting other rising prices into tightening budgets. But these numbers from the Bureau of Labor Statistics may be misleading. According to private real estate numbers, rental prices are actually decreasing, but as renters sign year-long leases, it takes some time for that to be reflected in the official numbers.
Other expenses unavoidable for consumers fell in October – medical costs cooled slightly to 5.02% year-over-year.
This was an encouraging inflation report – prices are cooling considerably. With lagged shelter inflation making up so much of the monthly index, these indexes may actually be even lower than what we’re currently seeing. Of course, prices are still distressingly high and far above the Fed’s target. Consumers are still feeling the pain of high prices, but things are moving in the right direction. With continued action from the Fed, 2023 may see continued declines in inflation.