Inflation in October was low. We’re tracking to about 2.5% inflation.
Posted on November 15, 2024
The inflation report issued Wednesday showed another month of low inflation; the seasonally adjusted measure for October was a bit greater than any of the five prior months, but the rate over the last six months point to 1.4% inflation. The 12-month inflation rate was 2.6%. Twelve-month inflation will most likely increase in the next two months until we get to the months January-April 2025 that replace the bulge of inflation this past January-April.
Core inflation, which excludes more volatile food and energy components runs at 2.5% annual rate over the last six months and 3.3% over the past year. Core inflation is closest to the Fed’s favored measure of inflation, PCE, that will be reported for October at the end of this month.
Details:
I display a table and six graphs that I’ve use to follow the trends in inflation. I added a graph on Hourly Wages.
The two most widely-reported measures of inflation are Seasonally-adjusted inflation and Core inflation.
• Seasonally-adjusted inflation. Inflation in October was a bit greater than the five prior months, but I wouldn’t label it as “high.” The last six months average 1.4%. We’ve not been that low since 2020.
The 12-month measure of inflation increased: this month’s rate replaced very low inflation for last October. The 12-month rate may increase at least for November and perhaps December: those were relatively low months last year. The 12-month measure will decline when the months January through April 2025 replace the bulge of inflation at the start of this year.
• Core inflation excludes volatile energy and food components. This is similar to the measure favored by the Federal Reserve.
Personal Consumption Expenditures (PCE) excluding Food and Energy is the measure of inflation that the Federal Reserve Board favors. The graph shows the data ending September; the data for October is issued at the end of this month. The last six months aim at an annual rate of 2.3%, The 12-month inflation is 2.7%. This graph shows we likely won’t see a decline in the annual rate until we replace that spike from last January. We get the report for January 2025 at the end of February.
== History of 12-month inflation rates ==
Full-year inflation measured by CPI-U shows that inflation for the last 12 months is at 2.6%. This measure of inflation will likely increase in the next several months. This November and December almost certainly will be greater than November and December of 2023 – months of deflation.
== Producer’s Price Index ==
The change in producer prices will impact consumer inflation. PPI for September declined. The rate for the last six months is 0.5%. annual rate.
== Services ==
The rate for the last six months is at 3.6% annual rate.
== Wages ==
Hourly wages have increased by 4.5% over the past year. Workers have seen a real increase in inflation.
Conclusion: Monthly inflation in October was another month of low inflation. We have to go back more than four years to find six months that were lower. The last six months of Core Inflation are at an annual rate of 2.6%. CORE and other measures of inflation won’t decline much, if at all for a number of months. The next potential declines are from months that replace the historical bulge of high inflation months of this past January, February and March.