Macro Musings: October CPI in the books
Back
Article Type
Insights
Topic
Macro
Published
November 13, 2024
Read time
5 mins
Author
Frank Rybinski, CFA
Share

With the recent back-up in interest rates, the market was set up for a hot consumer-price index (CPI) print. What it got was lukewarm.

 

Headline CPI came in at 0.2% in October compared to September. Meanwhile, core CPI, which comprises roughly 80% of the index) was 0.28%. The fear was that it would come in the high 0.3%'s and be rounded up to 0.4%. 

 

Digging a little deeper, core CPI, ex-shelter (which is 45% of the index) was 0.19% for the month (2.4% annualized). Annualizing the past 3, 6 and 12 months this index is at 1.6%, 1.6% and 2.0%, respectively. 

 

We point out the difference between the core CPI and the core CPI ex-shelter readings because the shelter component is very lagged given the calculation methodology. 

 

The new rent index is running 1.0% on a year-over-year basis. But old, increased rents are what has anchored the overall number higher. Over time those will roll off—typically the new rent index leads by four quarters. It’s also worth noting that the shelter component is a much smaller percentage of the % of the personal consumption expenditures (PCE) calculation.

 

Shelter costs

Sources: Bureau of Labor Statistics, Haver Analytics. Data as of November 2024.

 

Our early read-through for the core PCE reading is about 0.2% for October (2.7% year over year). We’ll know more when the latest producer price index data is released on Thursday. 

 

Overall, inflation is behaving for the most part. Yes, there is always noise in every print, but looking at Wednesday’s data doesn’t support the notion of a broadening acceleration. As a result, we see no near-term reason for Federal Reserve to alter its interest-rate path and expect another 25-basis-point cut at the December meeting.

 

Separately, the Senior Lending Officer Survey, which came out Tuesday, continued to show softening demand for money, on both the consumer and commercial and industrial loans. That echoes a point we’ve been making: That the level of interest rates ultimately matters for economic activity and that they are still in restrictive territory. 

Important disclosures

Author

Frank Rybinski, CFA
Head of Macro Strategy

Frank Rybinski, CFA, is head of macro strategy responsible for guiding the firm’s global macroeconomic view as it pertains to tactical and strategic asset allocation.

View profile
Macro Musings- October CPI in the books
Download Article
Macro Musings- October CPI in the books
Download Article
Related Articles
View all Aegon insights