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  The Consumer Price Index (CPI) increased 0.4% in October
Posted Under: CPI • Data Watch • Inflation
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Implications:  Consumer prices surged in October, rising 0.4%, coming on the heels of healthy increases in both August and September.  Although consumer prices are up only a tame 1.6% in the past year, they're up at a 2.5% annual rate in the past six months and a 3.5% annual rate in the past three months (the fastest three-month pace since 2012).  Energy prices led the index higher in October, as gasoline jumped 7%.  As we saw earlier this week in retail sales as well as both import and producer prices, consumer energy prices turned positive on a year-to-year basis for the first time since mid-2014.  In other words, the key headwind on inflation we have seen over the past two years is now turning into a tailwind.  Conversely, food prices, unchanged in October for a fourth consecutive months., remain a slight drag on overall inflation, and are down 0.3% in the past year.  Stripping out the typically volatile food and energy components, "core" consumer prices rose 0.1% in October and are up 2.1% in the past year.  The October increase in "core" consumer prices was led by housing.  Owners' equivalent rent, which makes up about ¼ of the CPI, rose 0.3% in October, is up 3.4% in the past year, and will be a key source of higher inflation in the year ahead.  Medical care costs took a breather in October but continue to be an area to watch, up 4.3% in the past year and showing acceleration over the past three- and six-month periods.  In addition to rising inflation, "real" (inflation-adjusted) average hourly earnings also rose in October, up 0.1%, and are 1.2% higher in the past year.  Along with other recent readings on inflation - and employment continuing to show health gains - today's CPI report should remove any doubt in the Fed's mind that a December rate hike is needed.

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Posted on Thursday, November 17, 2016 @ 11:50 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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