October CPI follows a month when gasoline drove over half of the rise in US prices

The US Bureau of Labor Statistics (BLS) will publish consumer prices for October at 8:30 a.m. ET on Tuesday, November 10, after a September report in which gasoline accounted for more than half of the monthly rise, according to the BLS release schedule and its September report.

One component carried September's jump

The consumer price index for all urban consumers (CPI-U) rose 0.6% in September on a seasonally adjusted basis, the BLS said. Over the 12 months through September the all-items index rose 3.7% before seasonal adjustment, a larger increase than the 3.4% reported for the 12 months through August. That is an acceleration of 0.3 percentage point (computed).

The BLS attributed much of the monthly move to fuel. The energy index increased 5.2% over the month, following a 2.1% increase in August, and the gasoline index rose 9.1% in September, "accounting for over half of the monthly all items increase." Over 12 months, the energy index was up in large part because gasoline rose 34.2%, the BLS said. FinanceInTime covered that release in a report on the gasoline-led rise.

A rise that rests on one volatile component leaves a plain question for the next report: whether the component held its level, gave some of the increase back or kept climbing.

Core prices were steadier than the headline

The index for all items less food and energy, known as core, rose 0.3% in September, as it did in August. Core is the measure analysts use to look past swings in fuel and groceries.

Two other parts of the basket were quieter than energy. The shelter index, which covers rent and the estimated rental value of owner-occupied homes, rose 0.4% in September after 0.3% in August, and was up 3.2% over the last year. The index for food was unchanged in September and was up 2.5% over the last year.

Taken together, the September figures show a headline that moved on energy and a core index that moved at the same 0.3% pace in both months. The report does not say whether that pace will continue.

The pump price moved little through October

The BLS measures the price of gasoline in its own index, which is seasonally adjusted, and the figures cannot be compared directly with the weekly retail prices the US Energy Information Administration (EIA) publishes. The weekly series still gives a rough sense of direction across October. The EIA's page listed US regular gasoline, including all taxes, at $4.284 a gallon in the week of October 19, $4.269 in the week of October 26 and $4.153 in the week of November 2.

From the first to the last of those readings the price fell 3.1% (computed), or 13.1 cents a gallon (computed). Between the first two it fell 0.4% (computed). The page did not show September weeks, so this comparison does not say how October's average compares with September's, which is the comparison the CPI will make.

What the Fed and the jobs report have already said

The Federal Reserve did not wait for the October CPI to set its position. On October 28 the Federal Open Market Committee "decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent," and its statement said: "Inflation remains elevated." The vote was 10-2, with Lisa D. Cook and Beth M. Hammack dissenting in favor of a 1/4 percentage point increase, according to the Fed's statement. FinanceInTime reported the decision in its coverage of the hold.

The labor market gave a firm reading on November 6. Total nonfarm payroll employment rose by 165,000 in October and the unemployment rate changed little at 4.1%, the BLS employment report said. Average hourly earnings for all employees on private nonfarm payrolls increased by 14 cents, or 0.4%, to $38.00. August payrolls were revised up to 186,000 from 133,000 and September to 60,000 from 29,000, the BLS said. FinanceInTime's report on the jobs data has the sector detail.

Neither release states a forecast for the CPI. They are inputs: a Fed with two members already voting for a higher rate, and a labor market that has not weakened in the latest report.

The calendar around the release

The BLS lists the October consumer price index and the related real earnings report for Tuesday, November 10 at 8:30 a.m. ET. Wednesday, November 11 is a federal holiday, Veterans Day, and the BLS shows no releases that day. The producer price index for October follows on Friday, November 13 at 8:30 a.m. ET, according to the BLS November schedule.

The three readings answer different questions. The CPI shows what consumers paid. The real earnings report puts pay against those prices. The producer price index shows price changes earlier in the supply chain.

We would read the core figure and the shelter line before the headline

We think the headline number on Tuesday will say less than the two lines beneath it. September's 0.6% was driven by gasoline, which accounted for over half of it, and the weekly pump prices fell 3.1% from October 19 to November 2 (computed). If that carries into the index, the headline would be expected to ease, but that expectation rests on a retail series that the CPI does not use directly, and we hold it loosely.

The threat is in the part that does not move with oil. Core rose 0.3% in both August and September and shelter rose 0.4% in September. If both repeat that pace, the Fed's two dissenters would have more to point to, and the reading would be harder for a hold to answer. The opportunity is the opposite case: a core reading below 0.3% alongside softer shelter would suggest that the September jump was the fuel component alone, which would take some pressure off the Fed's choice given the 4.1% unemployment rate.

We would watch core and shelter first, then the real earnings report, because pay of 0.4% a month matters differently depending on what prices did. Our view would change if October's energy index rose again despite lower pump prices, which would point to a source of price pressure we are not seeing in the weekly data. A single month rarely settles a trend, and we would want to see November's report on December 10 before calling a direction.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.