Delayed Data Show September Was Another Quiet Month for Inflation

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Were you waiting nervously for September’s report on the Consumer Price Index? You can relax now. The data, delayed by the government shutdown, is finally out and they hold no big surprises. None at all. The all items CPI rose in September at a seasonally adjusted 2.4 percent annual rate. On a year-over-year basis, the CPI was up just 1.2 percent.

The September increase in the CPI was spurred by an uptick in energy prices, which rose 0.8 percent in the month. The increase, however, was entirely due to seasonal adjustment. On an unadjusted basis, energy prices actually dropped in the month. Another way of removing seasonal influences is to note that energy prices in September 2013 were 3.1 percent lower than they were in September 2012.

Food prices, another CPI component that is often volatile, were unchanged for the month, both with and without seasonal adjustment. The food index was up 1.4 percent for the year. Removing both food and energy gives the core CPI, often thought to better reflect long-term inflation trends. The core CPI rose at a seasonally adjusted annual rate of 1.2 percent in September. Year-on-year it was up by 1.7 percent.

The following chart shows that both the all items and core CPI have followed a gentle arc over the past three years. After falling essentially to zero at the depth of the recession, inflation speeded up until the middle of 2011 when the trend lines for both the core and all items CPI reached the 2 percent mark.

Since then, inflation has lost steam and shows little sign of turning up any time soon. More data will be coming soon, but this release provides little to support the arguments of those who would like to tighten either monetary or fiscal policy.

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Ed Dolan is Wall St. Cheat Sheet’s in-house economics professor. He is the author of an acclaimed series of textbooks Introduction to Economics and Ed Dolan’s Econ Blog.

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