After last month's big spike—mostly due to gasoline prices—inflation settled down a bit in September:
But the news was mixed: CPI was down but core CPI edged up. That's both surprising and unwelcome.
28 thoughts on “CPI settles down in September”
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Let me guess, inflation is 1) transitory 2) not a problem 3) not action from the Fed is needed
Given the actual inflation, that appears correct.
But fear and panic are fun, so actual inflation can be ignored when creating a narrative.
Heres a graph that sets the recent quarters inflation as the baseline. Pretty normal. Fairly transitory.
https://fred.stlouisfed.org/graph/fredgraph.png?g=1a2e1
jdubs
transitory - while some elements of inflation were transitory, I struggle to see how today's, note supply chains are back to normal, inflation is transitory.
not a problem - if you exam polling from the working class in American, they clearly see inflation as a problem
no action needed by the Fed - okay so how does inflation return to the 2% goal? Or do you not believe in the 2% goal?
don't feed the troll
but jdubs isn't a troll
agree to disagree
If you are concerned about supply chains, what do you think the Fed can do about it? Raising interest rates is supposed to reduce investment - how would that increase supply? Is the whole economy supposed to be slowed down if there is a shortage of something or other or a problem in container shipping?
Supply chains are not entirely back to normal. I just bought a new Toyota, and received only one key fob, because Toyota can't get the parts they need to make enough. I'm waitlisted for the second one, and probably won't get it for a month or more.
+1
Second point, not for the first time, inflation is a rate of change; unless supply chains are continually getting worse, they won’t contribute to inflation. Prices remaining elevated but stable contribute zero to inflation. Zero. Nada. Nichts.
I thought I was replying to skeptonomist; not sure how this comment was relocated ….
If you assume that continuing supply chain problems are not impacting price changes, then you have assumed the conclusion.
What would happen to the price level of an item if supply chain problems were resolved and supply increased? Your assumption that this has no impact on the price doesnt seem likely.
“if supply chain problems were resolved and supply increased” I would expect prices to decline. That is disinflationary. It may be a welcome development, but it is not necessary for prices to fall to bring an end to inflation. Inflation ends when prices cease to rise. Inflation, again is the first derivative of a price index. If the price index remains constant over a period, the derivative of a constant, which in this case is termed ‘inflation’, is zero over that period.
Yes, but Im not sure what that has to do with the conversation.
CPI (or any inflation stat) is rhe aggregation of the price of many, many, many different products and prices.
No matter what the overal CPI is, some products are getting more expensive, some are staying the same and others are declining. It is not true that during an inflationary period, all prices are increasing and during deflation all prices are decreasing.
If you agree that future supply chain fixes/improvements would cause some products to decrease in price, then you agree that supply chain problems are still causing the rate of inflation to be higher than it would otherwise be.
That does not follow. You are confused over the difference between a level and a rate of change.
The mainstream-economics account is that supply constraints lead to price increases, which encourage existing producers to increase capacity, and/or new producers to enter the market, increasing supply; meanwhile, consumers may substitute another, less-expensive good, reducing demand for the supply-limited good — eventually, the market reaches a new equilibrium. Equilibrium == stability == rate of change fluctuating around zero. Cf.: Stein’s Law
You should look at the actual rates of inflation.
The rate of inflation for commodities, durable goods and services ex-housing have all been falling for a long time. The only area that appears stuck is housing/shelter, although it too has been falling for many months. Combined with the knowedge that housing/shelter is reported on a 6-12 month lag, we can see that actual prices spiked but have been falling for a long while now.
Commodity and durables began declining before the Fed raised rates.
Americans are certainly concerned about prices, but they are also concerned about supply of goods, jobs, income, housing costs, investments in new production and on and on. I would suggest you pay attention to all of these things. Pretending that Americans only care about price level changes is silly and its not at all clear that making it more expensive to buy a house or invest in supply increases is a good way to address the problem you have identified.
Carry on with the drama!
1) Inflation is (was) transitory, 2) which is a problem, and 3) correct, no action from the Fed is needed for inflation that doesn't have much, if anything, to do with levels of investment.
cmayo - certainly I am not qualified to determine the direction of the Fed. I suspect, we will see, the Fed position is closer to my position than yours: we will see...
Uh huh. OK.
Kevin you are not in despair?
Housing costs are still accounting for most of the inflation. Based on what we know about how housing costs are calculated (long lag), its fair to say that actual inflation over the last 12 months is far below the reported 3.7% rate.
Funny thing: many of the same people who insist inflation is a disaster and the Fed and others need to be extremely cautious unless someone can prove it isn't a danger at all also insist climate change isn't a disaster and the economic sector shouldn't institute any changes until it has been proved true by 100% of scientists.
One might almost think some of these people want higher interest rates while wanting to spend zero dollars fighting climate change (or paying a penalty for worsening it), and their positions are based on what they want and not on what's actually happening.
"Funny thing: many of the same people who insist inflation is a disaster and the Fed and others need to be extremely cautious unless someone can prove it isn't a danger at all also insist climate change isn't a disaster and the economic sector shouldn't institute any changes until it has been proved true by 100% of scientists."
Uh, what? I don't notice any pattern or correlation between these two issues whatsoever. Those on the right who deny climate change are also insisting inflation is a disaster, presumably because they aren't interested in facts. Those who aren't on the right and aren't concerned about inflation are generally concerned with facts and the facts show climate change is real and action is needed. I'm sure there are SOME people who aren't concerned by either one, but off the top of my head I can't think of a single person that I know personally or who is a public figure.
"One might almost think some of these people want higher interest rates while wanting to spend zero dollars fighting climate change (or paying a penalty for worsening it), and their positions are based on what they want and not on what's actually happening."
You've just described complacent, typically older, people or voters. Who... tend to be more right-wing than the rest of the population, and are a minority. You're literally describing the haves vs. the have-nots.
None of this squares with the assertion that starts your comment.
Ironically (see my post below) addressing climate change would also help us keep future rises in food prices in check. Without concerted action, we're looking at a future where a lot of the land in this country can no longer sustain the kind of agriculture that makes our society and economy possible. Unfortunately, so many farmers and ranchers just tell themselves the Lord is testing them like Job and if they just pray enough, this too shall pass and they don't need to buy into all this DFH nonsense about climate change. Well, the Good Book says "earth abides." It doesn't say anything about you and your farm.
Ever thought about switching to (core) sticky prices to predict the future of inflation? Can't get any more core than that.
https://fred.stlouisfed.org/graph/?g=1a2TN
People are also forgetting that a lot of the ongoing inflation in food and grocery prices is weather-related. Much of the midwest remains in a serious drought, which is really hitting the price of grain, feed, poultry, and (esp.) beef. Big stretches of the Mississippi may not be navigable for much longer, which is going to send transportation costs for commodities way up as well. This is all going to keep food prices pretty high for the foreseeable future and there's not a damn thing the Fed can do about it.
Housing (rent in particular) has been running at 7.3% and has stubbornly refused to come down
Housing starts have come down from their peak, and pricing is stabilizing (depending upon the market you are in) but rents are still rising. This is driven by greed. Most people KNOW that as boomers die off there will be a housing over supply and yes a rental unit over supply as well.
They are prepping for that - because it sure looks like we will NOT be seeing a huge increase in immigration if the republicans have their way.
Inflation data is noisy almost by definition, nevertheless the trend is clear, we have inflation hovering around 1% above the mystical marker. I think it’s time for all analysts to take a macro view of things. Enough said.
Of course all the "Kevin's completely wrong" people come out whenever there is a post on inflation. I'll admit, seeing the higher inflation number this month I started to wonder if I'd been too hard on the Fed. I went to http://www.calculatedriskblog.com like I often do. He has charts!
https://www.calculatedriskblog.com/2023/10/yoy-measures-of-inflation-services.html
He begins:
The first graph is the one Fed Chair Powell had mentioned earlier when services less rent of shelter was up 7.6% year-over-year. This has fallen sharply and is now up 2.8% YoY.
Digging through some more I found:
Durables were at -2.2% YoY as of September 2023
Commodities less food and energy commodities were unchanged YoY in September
Shelter was up 7.1% year-over-year in September
Core CPI ex-shelter was up 1.9% YoY in September
Someone said food prices were still rising. So I did a google search on food inflation and found:
https://www.nerdwallet.com/article/finance/price-of-food
It says it was updated Oct. 12 with the most recent price index data.
Food prices rose 3.7% between September 2022 and September 2023
but that included all food. The index for food at home (groceries) is 2.4% higher year-over-year. From August to September, grocery costs increased slightly by 0.2%.
The article then lists the foods that have gone up and down recently.
OK. So basically, everything, even food prices, are still under control except shelter. I own so even that doesn't affect me, and Biden can't do anything about rent. And will the Fed raising rates really bring down rent? Seriously, how will higher interest rates bring down rent?
I think a lot of people (including Kevin) are wrong about big companies buying up houses and rental properties. They keep prices high and don't care if more of their places are empty. But in any case, I have no idea how to keep landlords from raising prices. Housing doesn't seem in significantly shorter supply than a few years ago.