Meet the Author

Michael Bryan |

Author

Michael Bryan

Michael Bryan is a former vice president and economist in the Research Department at the Federal Reserve Bank of Cleveland.

Meet the Author

Brent Meyer |

Economist

Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.

11.29.07

Economic Trends

October Price Statistics

by Michael F. Bryan and Brent Meyer

The Consumer Price Index (CPI) rose at an annualized rate of 3.6 percent in October—the second straight increase since the index’s 1.7 percent drop in August. Year-to-date, the CPI has advanced 3.6 percent (at an annualized rate), which is ahead of 2006’s annual increase of 2.5 percent. Growth in the CPI excluding food and energy prices (core CPI) slowed to 1.9 percent, after having climbed to 2.7 percent in September. However, both the median and 16 percent trimmed-mean CPI indicators posted increases above 3 percent in October (3.2 percent and 3.4 percent, respectively), outpacing their 3-, 6-, and 12-month averages.

October Price Statistics

    Percent change, last
    1mo.a 3mo.a 6mo.a 12mo. 5yr.a 2006 avg.
Consumer Price Index
  All items
3.6
1.7
2.8
3.5
2.9
2.6
  Less food and energy
1.9
2.1
2.3
2.2
2.1
2.6
  Medianb
3.2
2.8
2.6
2.8
2.5
3.1
  16% trimmed meanb
3.4
2.6
2.3
2.5
2.3
2.7
Producer Price Index
  Finished goods
0.7
−0.7
2.1
6.1
3.6
1.6
  Less food and energy
0.0
1.0
1.8
2.5
1.5
2.1

a. Annualized.
b. Calculated by the Federal Reserve Bank of Cleveland.
Sources: U.S. Department of Labor, Bureau of Labor Statistics; and Federal Reserve Bank of Cleveland.

The 12-month growth rate in the CPI rose from 2.8 percent in September to 3.5 percent in October and has increased 1.5 percentage points over the last two months to the highest it has been since August 2006. The 12-month trends of the core CPI and the 16 percent trimmed-mean CPI inched up during the month, to 2.2 percent and 2.5 percent, respectively. The longer-term trend in the median CPI held steady at 2.8 percent, which is down from a recent high of 3.2 percent in March.

Roughly 53 percent of the CPI's components increased in excess of 3 percent in October, compared to 45 percent over the previous three months. Some interesting and possibly transitory component-price increases led to overall acceleration in the index. Public transportation prices, which increased 3.1 percent in the third quarter, jumped 16 percent in October because of a 23.5 percent spike in airline fares. Hospital and related services, which had been increasing moderately for most of the year, rose 14 percent, the largest increase of this CPI component in five years.

There were also some unusual price changes in the shelter category. Rent of primary residence, which had been moderating in recent months, posted its largest increase in six years, rising 5.6 percent in October. In contrast, owners’ equivalent rent (OER) increased 2.7 percent during the month, after increasing 3.4 percent last month. The 12-month trend in OER has lessened considerably more than rent of primary residence. Another interesting price move in this month’s CPI report was in lodging away from home, which has risen 5.5 percent year-to-date but fell 16.3 percent in October.

Following a couple of somewhat unfavorable CPI reports, household inflation expectations, as measured by the University of Michigan’s Survey of Consumers, ticked upward in November.  Expected average short-run inflation rose from 3.7 percent in October to 4.3 percent for the year ahead. Longer-term expectations (5 to 10 years out), posted a slight increase (from 3.1 percent to 3.4 percent in November), but remain near the ten-year average of 3.4 percent.