The Boock Report

Consumer prices in September rose by .4% headline and .6% core, both 2 tenths more than expected. The y/o/y gain was 8.2% vs 8.3% in August and the core rate accelerated to a 6.6% rise from 6.3% and that’s a 40 yr high. While energy prices fell by 2.1% m/o/m, food prices rose by .8%. 

Services inflation ex energy drove the core rate higher with an .8% m/o/m and 6.7% y/o/y increase. Rents grew by .8% m/o/m and continues to accelerate in the BLS calculations. Rent of Primary Residence is higher by 7.2% y/o/y and OER by 6.7%. Medical care costs were a main factor too as they rose .8% m/o/m and 6% y/o/y and here the Fed has NO influence. Health insurance prices jumped 2.1% m/o/m and 28% y/o/y. Car insurance prices jumped 1.6% m/o/m and by 10.3% y/o/y and fixing them saw prices up 1.9% m/o/m and 11.1% y/o/y. Air fare prices were up by .8% m/o/m after sharp drops in the two prior months but are still up 43% y/o/y. 

This more than offset no m/o/m change in core goods prices after a .5% rise in August. They are still up 6.6% y/o/y but that’s the slowest since May 2021. Used car prices fell 1.1% m/o/m and y/o/y slowed to 7.2%. New car prices though rose .7% m/o/m and 9.4% y/o/y. Apparel prices declined .3% m/o/m though are up by 5.5% y/o/y. Household furnishings and supplies saw prices up .6% m/o/m and 9.9% y/o/y. 

As I stated this morning, the key today was to what extent the acceleration in services inflation was going to offset the slowdown in goods price gains and we now see the end result. Also, the problem with the whole inflation discussion now is the lagged nature of rent gains in the BLS data with the slowdown in the actual pace of growth in a variety of other surveys. 

We can all see the market reactions but specifically the fed funds futures are selling off sharply and the peak fed funds rate next year is up to 4.85% as of April/May.

Headline CPI y/o/y

Core CPI

Services ex Energy y/o/y

Core Goods y/o/y