November 15, 2017 – The Consumer Price Index (CPI) tells us of any inflationary pressures in the economy. The CPI measures the average price levels of a basket of goods and services purchased by consumers. The index starts with a base time period (1982-1984, currently) and shows the overall increase since that time. As with many economic indicators, it can be volatile from month to month with food and energy prices often leading the volatility.
The Consumer Price Index increased 0.1% in October, in line with expectations and notably less than September’s 0.5% increase. Core CPI, which excludes food and energy rose 0.2%, also in line with expectations. Year-over-year CPI is up 2.0% and core CPI is up 1.8% over the last year. Energy contracted from last month’s 6.1% to -1.0% in October.
Although October’s CPI slightly increased, it has started to taper off compared to the previous three months of increases. A large part of the taper in the CPI is because the southern states are recovering from the hurricanes. Factories, oil rigs and refineries are back up and running producing and supplying more goods. Since volatile components such as food and energy can sway CPI from month-to-month, core CPI provides a more realistic gauge of price movements.