September Consumer Price Index: Little Changed From August

The Bureau of Labor Statistics released the September CPI data this morning. The year-over-year unadjusted Headline CPI came in at -0.04%, down from 0.20% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.89% (rounded t0 1.9%), little changed from the previous month's 1.83% (rounded to 1.8%).

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

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

The energy index fell 4.7 percent in September, with all major component indexes declining. The gasoline index continued to fall sharply and was again the main cause of the seasonally adjusted all items decrease. The indexes for fuel oil, electricity, and natural gas declined as well. 

In contrast to the energy declines, the indexes for food and for all items less food and energy both accelerated in September. The food index rose 0.4 percent, its largest increase since May 2014. The index for all items less food and energy rose 0.2 percent in September. The indexes for shelter, medical care, household furnishings and operations, and personal care all increased; the indexes for apparel, used cars and trucks, new vehicles, and airline fares were among those that declined. 

The all items index was essentially unchanged for the 12 months ending September after posting a 0.2 percent increase for the 12 months ending August. The 18.4 percent decline in the energy index over the past year offset increases in the indexes for food (up 1.6 percent) and all items less food and energy (up 1.9 percent). [More…]

Investing.com was looking for a 0.1% MoM increase in the seasonally adjusted Core CPI and -0.1% in the MoM Headline CPI. Year-over-year forecasts were 0.2% for 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. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

 

The next chart shows both series since 1957, which was the first time the government began tracking Core Inflation.

 

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) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI remains below the PCE target range of 2 percent.