U.S. inflation gauges sent mixed signals last month, according to new data from the Bureau of Labor Statistics (BLS). First, the producer price index (PPI) jumped by 0.6 percent in October, the largest increase since September 2012 and three times the gain economists expected. Although the recent volatility in the energy space (surging natural gas and plummeting oil) will likely add some noise to this measure of wholesale cost pressures in subsequent reports, there has been a clear buildup in service-price inflation this year. More businesses will eventually try to pass on this rise in input costs to consumers but for now household inflation appears to have actually cooled somewhat.
Specifically, the core consumer price index (CPI) for all urban consumers, which excludes the volatile food and energy components, rose by 0.2 percent in October. Much of the increase was due to a rebound in used-car prices, while cost gauges for new cars, communication, recreation, and personal care all declined. Moreover, core CPI gained just 2.1 percent in October on a year-over-year basis, the slowest annual advance since April and the third monthly downtick in a row. While this latest moderation in household price pressures may not last, a separate report from the BLS released this morning encouragingly showed that real (inflation-adjusted) average hourly earnings growth on an annual basis jumped to 0.7 percent in October, one of the best readings of the current business cycle.
Sources: Econoday, U.S. DoL, Bloomberg, Twitter, FRBSL
Post author: Charles Couch