Have we licked the inflation monster?
Posted on October 27, 2023

A final data point for inflation in September was issued this morning. That was for the important chart below for Personal Consumption Expenditures less Food and Energy components. This is the measure of inflation that the Federal Reserve favors. The last six months point to 2.8% annual rate, and the rate for the last four months tracks to a 2.4% annual rate. These are the lowest rates in several years.

 

Going deeper: below I display a table and the same six graphs that I’ve use to follow the trends in inflation.

 

 

The two most widely-reported measures of inflation are Seasonally-adjusted inflation and Core inflation. These and most all other measures of inflation are reported at about the two-week point in the following month.

 

Seasonally-adjusted inflation increased by 0.40% in September. August and September were greater than the prior six months. The rate over the last six months aim at an annual rate of 3.8%.

 

 

Core inflation excludes volatile energy and food components. This is similar to the measure favored by the Federal Reserve. The last six months aim at an annual rate of 3.6%, and the last four track to 2.8% annual rate.

 

 

Personal Consumption Expenditures (PCE) excluding Food and Energy is the measure of inflation that the Federal Reserve Board favors. It’s a chain-type index meaning the weights of components are revised during a year to more accurately reflect changes in purchasing patterns. It’s the measure reported near the end of the following month. The last six months aim at an annual rate of 2.8%. The last four months aim at 2.5%. These are the lowest in several year.

 

 

== History of 12-month inflation ==

 

Full-year inflation measured by CPI-U shows that inflation for the last 12 months has been 3.7%.

 

 

== Producer’s Price Index ==

 

The change in producer prices will impact consumer inflation. PPI over the last six months is at a -2.7%. annual rate.

 

 

== Services ==

 

The last six months aim at an annual rate of 4.7%.

 

 

 

Conclusion: The last six months of the most widely reported measure of inflation – CPI Seasonally Adjusted – aims at 3.8% annual inflation. The Federal Reserve’s favorite measure of inflation, Personal Consumption Expenditures excluding Food and Energy alters the weights of the components several times during the year to more accurately reflect consumer buying patterns. The last six months aims at 2.8% annual inflation, and the last four aim at 2.5% inflation.