Shelter costs accounted for half of the inflation increase in October.
The U.S. annual inflation rate rose for the first time since March, suggesting that the final mile toward achieving the Federal Reserve’s 2 percent target might be bumpy.
According to the Bureau of Labor Statistics (BLS), the annual inflation rate increased to 2.6 percent in October, up from 2.4 percent in September.
Heading into the October CPI report, economists had expected the annual inflation rate to inch up to 2.6 percent.
Consumer prices also jumped by 0.2 percent for the fourth straight month, matching economists’ expectations.
The core consumer price index (CPI), which strips the volatile energy and food categories, was unchanged as expected at 3.3 percent. Core inflation also swelled 0.3 percent from September to October.
Shelter accounted for half of the inflation increase last month, the BLS said.
The index for shelter advanced 0.4 percent and is up by 4.9 percent from a year ago.
Shelter costs have contributed a sizable share to the core inflation stickiness. Despite many economists and Federal Reserve officials anticipating housing costs to fall, they remain elevated.
The energy index was 0 percent month over month but is up by 3.8 percent in the 12 months ending October. Gasoline costs slipped 0.9 percent and are down by more than 12 percent year over year.
Crude oil prices have been highly volatile this year. The U.S. benchmark—West Texas Intermediate (WTI)—has been trending downward after hitting an April peak of $86 on the New York Mercantile Exchange. Though there have been periods of significant gains amid geopolitical tensions, they endured a sharp selloff.
WTI crude is now trading below $69 a barrel. This has also weighed on gasoline prices, which are hovering around $3.08 per gallon, according to the American Automobile Association (AAA).
Based on the October CPI report, the most notable price changes over the past year have been transportation (8.2 percent), shelter (4.9 percent), electricity (4.5 percent), food away from home (3.8 percent), and medical care (3.8 percent).
Looking ahead to next month’s CPI data, the Federal Reserve Bank of Cleveland’s Inflation Nowcasting model anticipates the annual inflation rate coming in at 2.7 percent.
The next key inflation report will be the October producer price index (PPI). Economists expect little change in producer prices.
By Andrew Moran
