CPI Rises 0.3% in October Led by Gasoline Index: This Won't Last

The Consumer Price Index rose 0.3% in October. The gasoline index was responsible for over one-third of the rise.

The BLS Consumer Price Report for October shows an interesting development related to gasoline.

> The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in October on a seasonally adjusted basis after rising 0.1 percent in September. Over the last 12 months, the all items index rose 2.5 percent before seasonal adjustment.

> An increase in the gasoline index was responsible for over one-third of the seasonally adjusted increase in the all items index; advances in the indexes for shelter, used cars and trucks, and electricity also contributed. The increases in the gasoline and electricity indexes led to a 2.4-percent rise in the energy index. The food index, in contrast, declined slightly in October.

> The index for all items less food and energy rose 0.2 percent in October following a 0.1-percent increase in September. Along with the indexes for shelter and for used cars and trucks, the indexes for medical care, household furnishings and operations, motor vehicle insurance, and tobacco all increased in October. The indexes for communication, new vehicles, and recreation all declined.

> The all items index rose 2.5 percent for the 12 months ending October, a larger increase than the 2.3-percent increase for the 12 months ending September. The index for all items less food and energy rose 2.1 percent for the 12 months ending October. The energy index increased 8.9 percent, while the food index increased more modestly, advancing 1.2 percent over the last 12 months.

CPI Month-Over Month and Year-Over-Year

Reports from Mars

If you buy your own health care insurance, are in college, or are looking to buy a home, you likely think those reports are from Mars.

Energy

The energy index rose 2.4 percent in October after falling in September. The gasoline index increased 3.0 percent in October following a 0.2-percent decline in September. (Before seasonal adjustment, gasoline prices increased 0.6 percent in October.) The index for electricity rose 2.3 percent in October. In contrast, the index for natural gas declined, falling 0.6 percent.

The energy index increased 8.9 percent over the last 12 months. The gasoline index rose 16.1 percent over the span, while the fuel oil index increased 26.2 percent. The electricity index increased modestly, rising 0.7 percent over the last year. The index for natural gas, in contrast, declined 2.1 percent over the last 12 months.

The lead chart is from the weekly Gasoline and Diesel Fuel Update by the EIA, the US energy Information Administration.

Gasoline Futures

Wacko Seasonal Adjustments

The gasoline Index seems to be impacted by a wacko seasonal adjustment as well as some sort of variation in California.

This will not last. Expect to see a strong reversal in the energy component of the CPI in November.

Also see Energy Bloodbath Continues: Five Reasons Why Crude is Plunging.

Mike "Mish" Shedlock

Comments
No. 1-2
flubber
flubber

I was totally stunned with my visit to Florida Blue Cross office this morning. I was expecting an increase on my plan (ACA 'Obamacare'). I didn't change a thing regarding reported estimated income, etc. The premium for my plan (middle of the road benefits) dropped $100 per month. I told the agent to go ahead and sign myself and wife up for the same plan for 2019. This is the first time in 8 years of having to obtain my own healthcare coverage that the premium has fallen.

Carl_R
Carl_R

People ask sometimes why we have the "CPI excluding food and energy". The answer is that food and energy is more volatile. Over the long term, the CPI and the CPI excluding food and energy are equal, but in the short term the CPI excluding food and energy is much more stable.

In recent months, with rising energy prices, the full CPI has been higher than the the one excluding food and energy, as seen above in Mish's chart. Now, with energy prices falling, the full CPI will be less than the CPI excluding food and energy.

For a prediction of future inflation, I usually look at the Moore Inflation predictor. His most recent one is 10/11.

It called for a 2.5% year over year number in October, which was correct, with it falling to 2% by March. Since oil prices have fallen more since his prediction, I'm guessing that his next prediction will be closer to the lower line on his chart, a drop to 1.5% by March.