Core Rise – CPI Inflation Report
After heavy anticipation, the September CPI report was finally released yesterday morning. Overall consumer prices increased by 0.4 percent from August, which was higher than the expectation of 0.2 percent. Economists expected price increases to slow from last month, which did occur, but it was not at the rate we wanted it to.
Even worse, the statistic of core inflation seemed to have veered off in the wrong direction. Core inflation rose by 0.6 percent in September, amounting to a 6.6 percent increase from a year ago. This is the largest yearly increase since August of 1982, and it displays a deep problem in the United States economy. This is a metric that excludes food and energy, the two things killing global economies, yet it increased suddenly. Economists attribute this rise to an increase in housing costs, which might be skewing the data in a sense. This housing section accounts for 40 percent of the core CPI, and it moves slowly because leases are renewed annually. Nonetheless, the price for core services also increased by 9.9 percent compared to last year, with small increases in preschool services and motor repair.
Despite all of this, the market found a way to have one of its best days in the last few weeks. Indices rose by as much as 3 percent on the day, but it’ll be laughable if this manages to be a long-term rally. The Fed received their justification to go forward with their aggressive rate hikes, and they might not shy away from it considering it looks like the situation is getting worse. To end on a positive note, Social Security benefits will rise by 8.7 percent next year to adjust for the cost of living now, keeping our retirees economically safe.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
