The Consumer Price Index (CPI) moved up 0.2% in October, after a 0.1% gain in the prior month. The year-to-year change is 1.2%, with the CPI trending down after a 2.7% increase in December. During the July-October period, energy prices have lifted the overall CPI. In October, higher gasoline prices (+4.6%) were responsible for nearly 90% of the increase in the CPI. The CPI excluding energy held steady in October after a similar reading in the prior month. Food prices inched up 0.1% in October, putting the year-to-year gain at 1.4%.

The core CPI, which excludes food and energy, held steady for the third month in a row. The 0.6% year-to-year increase in the CPI is the lowest since record keeping began for this series in 1957. The core CPI makes up nearly 78% of CPI. The underlying pace of inflation remains more contained than what the Fed would prefer.

In October, price measures of shelter (+0.1%) and medical care (+0.2%) advanced but these higher prices were offset by declines in prices of new cars and trucks, clothing, tobacco and recreation.

The probability of deflation is significant, given the decelerating trend of both overall and core consumer prices, if the economic fails to grow at a more rapid clip compared with the tepid pace of the sub-par growth seen in the second and third quarter of 2010. The October CPI report supports recent plans of the Fed to engage in $600 billion of purchases of Treasury securities.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com
Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.