U.S. CPI Edges Up in October, Market Keeps Expectations for December Rate Cut

By TrendForce

2024-11-14

The U.S. CPI showed a slight increase in October, as reported by the U.S. Bureau of Labor Statistics on November 13.

The October CPI annual growth rate stood at 2.6%, marking a 0.2 percentage point increase from the previous month, while the month-over-month rate held steady at 0.2%. Core CPI, which excludes volatile food and energy prices, exhibited an annual increase of 3.3% and a monthly rise of 0.3%, both figures unchanged from the prior month and in line with market expectations.

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Breaking down the components, the increase in CPI was primarily driven by:

Energy prices, which continued to decline by 4.6% month-over-month, but at a narrower pace than the 6.0% drop observed in the prior month.
Used car prices rose by 2.7% month-over-month, a notable increase of 2.4 percentage points compared to the previous month.
Housing services prices increased by 0.4% month-over-month, up from a 0.2 percentage point gain in the prior month. Specifically, rent and owners' equivalent rent rose by 0.3% (unchanged from the previous month) and 0.4% (up from 0.3%) respectively.

CPI Hearmap (MoM)

(Source: BLS, TrendForce)

Overall, the upward movement in inflation primarily reflected a narrowing decline in energy prices and a resurgence in used car prices, with a reduced base effect also contributing to the annual increase. Despite these factors, there was no indication of a significant acceleration in overall inflation.

Housing services inflation continues to exhibit some persistence; however, there is positive news as the annual growth rate for new lease rents in Q3 2024 was just 1.01%, down by approximately 11 percentage points from its 2022 peak and remaining at historically low levels, indicating that further cooling may be on the horizon.

U.S. New Tenant Recent Index (YoY)

(Source: BLS, TrendForce)

Following the data release, market expectations for a December rate cut by the Federal Reserve remained unchanged, with U.S. Treasury yields experiencing a modest decline. This suggests that markets still anticipate potential easing in the Fed's rate path heading into 2025.

Current target rate us 250 to 475

(Source: FedWatch)

2024-11-18

Why Haven’t Consumer Prices Dropped Despite Easing Inflation?

As global economic growth slows, many central banks around the world have begun to cut interest rates in an effort to reignite economic expansion. One of the main drivers behind this move is that inflation rates in most countries have gradually fallen back to levels within their central banks' target range. In theory, a gradual moderation in price increases should boost consumer optimism, as it indicates that inflation's erosion of wage gains is easing. However, why do media outlets continue to report on consumers being overwhelmed by high living costs? The obvious reason is that annual inflation rates only consider changes in prices relative to the previous year. Although current price growth has moderated compared to last year, it does not change the fact that prices have significantly risen from the pre-pandemic levels. (Source: BLS, EuroStat, Statistic Bureau of Japan, TrendForce) Take the United States as an example. The latest US - CPI and US - core CPI year-on-year growth rates were 2.6% and 3.3%, respectively, marking their slowest pace in nearly three years. Meanwhile, the Fed most preferred inflation gauge, US - core PCE, stood at 2.7%, down significantly from its peak of 5.6% in February 2022, reflecting a 2.9 percentage point decline. However, consumer perceptions often remain anchored to periods of lower prices, making it difficult to recognize the recent moderation in price growth. For consumers, goods prices are significantly higher than pre-pandemic levels, even if the pace of increase has slowed. According to data from the U.S. Bureau of Labor Statistics, the average prices of most goods have risen by approximately 20-40% over the past few years. The key point is that these prices are unlikely to return to previous levels unless deflation occurs—a scenario that the Federal Reserve is determined to prevent. (Source: BLS) Moreover, while consumer wage growth has surpassed the inflation rate since mid-2023, the overall increase in wage levels since the pandemic has still lagged behind inflation. This persistent gap has been a significant factor in eroding consumer confidence and fueling anger over high prices in recent years.

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