CPI Report Shows Inflation Rising in Auto Insurance, Food, and Services

CPI Report Shows Inflation Rising in Auto Insurance, Food, and Services 

The recent CPI report revealed higher-than-expected figures across all areas, aligning with insider forecasts that were already above consensus. Auto insurance and medical costs continued to rise, which was largely anticipated. The Bureau of Labor Statistics (BLS) reported a 56 percent increase in auto insurance under Biden, though many have experienced premiums doubling in the last year.

Food inflation has also returned, with five of the six major grocery categories showing increases. The meats, poultry, fish, and eggs index rose by 0.8 percent in September, while the index for eggs surged by 8.4 percent. The fruits and vegetables index grew by 0.9 percent, reversing a small decline from August. Shelter costs rose 0.2 percent, and these two areas accounted for over 75 percent of the overall price increases according to the BLS.

Other notable findings from the report include a 4.2 percent jump in college textbook prices, the largest monthly increase on record. Admission prices for sporting events increased by 10.9 percent, also setting a record for the biggest monthly rise. Jewelry and watches saw prices rise by 5.2 percent, the highest monthly increase ever recorded. Airfares also increased by 3.2 percent despite suggestions that airlines were losing pricing power.

Though there was some positive news regarding easing shelter costs, questions remain about the BLS's findings on this matter, as other housing indexes show prices increasing by 6 percent year-over-year.

Wall Street analysts had various reactions to the data. 

Leo He from UBS noted that both headline and core CPI were higher than expected, driven by increases in used car prices and medical services. 

Ali Jaffery at CIBC Capital believes the labor market is cooling but inflation remains slightly above target, suggesting the Federal Reserve won't rush to cut rates. 

Karl Schamotta of Corpay mentioned that gradual rate cuts remain likely, but not in quick succession. 

Anna Wong from Bloomberg Economics saw both good and bad news in the report, pointing out progress in rent disinflation but persistent inflation in key services like auto repairs and insurance. She expects a rate cut in November. 

Ira Jersey from Bloomberg noted the volatility in auto costs and stressed the importance of next week's retail sales report for understanding the Treasury yield outlook. 

David Russell of TradeStation remarked that the slowing shelter costs are important and could reduce CPI-driven volatility. 

Jamie Cox of Harris Financial pointed out that disinflation is occurring, though the Fed will reduce rates cautiously. 

Olu Sonola from Fitch Ratings sees the disinflation trend continuing but highlighted that services inflation remains a challenge, with the Fed likely maintaining a cautious stance. 

Michael Brown from Pepperstone predicted consistent rate cuts through the end of 2024, while Florian Ielpo from Lombard Odier said inflation might temporarily push rates up, even as lower rates have helped corporate earnings.