There were two important reports on the U.S. economy released this morning. First, data from the Bureau of Labor Statistics (BLS) showed that household inflationary pressures firmed slightly last month, with the consumer price index (CPI) for all urban consumers rising by 0.3 percent in September. This was the largest sequential increase since April, and headline CPI lifted by 1.5 percent on a year-over-year basis, the fastest pace of annual growth in nearly two years. “Core” CPI, which excludes the more volatile food and energy components, rose by 0.1 percent in September and 2.2 percent over the past twelve months, both below expectations. The categories of apparel (-0.7 percent), education (-0.3 percent), and recreation (-0.1 percent) dragged on the core index in September but shelter (+.0.4 percent), medical care commodities (+0.6 percent), and prescription drugs (+0.8 percent) costs remained strong drivers of consumer inflation last month. The annual pace of growth in core CPI was slightly lower in September than in August, which supports the officials at the Federal Reserve who believe inflation remains contained and that they can therefore move gradually with monetary policy. Also of note, the last three months of data for the consumer price index for urban wage earners and clerical workers (CPI-W) suggest that the nearly 66 million Americans who receive Social Security benefits or Supplemental Security Income payments will receive a cost of living adjustment (COLA) of 0.3 percent in 2017, as expected.
Elsewhere, a report from the National Association of Home Builders (NAHB) showed that surveyed builders this month were slightly less confident in the market for newly built, single-family homes. Specifically, the NAHB’s housing market index slid to 63 in October, in line with expectations and still the second-best reading 2016-to-date. Under the hood, the gauges of current sales conditions and prospective buyer traffic deteriorated this month but surveyed builders were more optimistic about sales six months from now. Regionally, sentiment strengthened over the past three months in the West but worsened everywhere else. NAHB Chief Economist Robert Dietz said that “the October reading represents a mild pullback from a jump in September, and indicates that the housing market continues to make slow and steady gains.” However, NAHB Chairman Ed Brady added that “builders in many markets continue to express concerns about shortages of lots and labor.”
Sources: Econoday, Twitter, Bloomberg, ZH, U.S. Department of Labor, NAHB, FRBSLPost author: Charles Couch