Inflation Was Non-Existent In October

Inflation beat expectations in October as consumer prices were flat.

The latest consumer price index report from the BLS showed prices were flat in October when compared to the prior month, beating expectations.

Excluding food and energy, prices rose 0.2%.

Compared to the prior year, prices rose 1.7% and prices rose 1.8% when excluding food and energy.

Expectations were for the latest CPI report to show prices fell 0.1% month-on-month in October and rose 1.6% when compared to the prior year.

On a “core” basis, which excludes the price of food and gas, prices were expected to show a 0.1% monthly rise and a 1.7% increase when compared to last year.

In September, prices rose just 0.1% on both a headline and “core” basis month-on-month, and both measures showed a 1.7% increase over the prior year.

In a note to clients ahead of the report, Ian Shepherdson at Pantheon Macro said the impact of lower gasoline prices on CPI would be “unambiguous.”

Shepherdson says the CPI headline reading would be pushed down by gas prices, which he expected to fall 4.5% in October, enough to pull 0.25% from the reading.

Gas prices fell less than Shepherdson expected in October, falling 3% from the prior month, though this decline was offset by increases in shelter and other indexes, according to the BLS.

In a note to clients following the report, Shepherdson said, “In one line: Core rebound is no big deal; trend still stable… the deflation fears gripping Europe do not apply in the US. Next month will see another steep drop in gas prices.”

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