There were two major reasons for the notable increase in consumer prices in October, says Bob Hughes, senior research fellow at the American Institute for Economic Research. The Consumer Price Index for October was released this morning, showing prices were up 0.4 percent over September.
The first, he said, is energy. Gasoline and home heating oil jumped 7.0 and 5.9 percent, respectively. It was the second month in a row of big increases. Nevertheless, over the last 12 months, energy commodities are still down, by 0.9 percent.
The second, and more impactful category for inflation, was core services, which rose 0.2 percent over the latest month. Core services are up 3.0 percent over the last year. Hughes noted that within core services, shelter is up 3.5 percent, transportation services are up 2.6 percent, and medical care services are up 4.1 percent.
Other factors remained stable. Food prices, typically volatile, were unchanged for the second month in a row, as slight declines at food stores were offset by increases at restaurants, he said. Goods excluding energy rose 0.1 percent in October, after dropping 0.1 percent in September. Over the past year, core goods prices are down 0.5 percent.
The notable exception, Hughes said, is medical care goods, up 0.1 percent in October and 5.0 percent over the past year.
“The Consumer Price Index is rising faster on a rebound in energy following the collapse that began in mid-2014, while core service price increases are broadly accelerating,” Hughes said. “Furthermore, with economic growth a bit more stable, the labor market tight, and the trend in prices firming, it seems highly likely that the Fed will boost the federal funds target rate at the FOMC meeting in December.”