Consumer Price Index Rises on Cars and Energy Costs

Strategic Insights -

The Consumer Price Index (CPI) for October rose by 0.3%, higher than the expected 0.2%, driven primarily by increases in energy costs and car prices. The core consumer price index, which strips out food and energy prices, rose 0.2%, also higher than the 0.1% expected. The increase in energy prices was not unexpected, given the recent surge in crude oil and natural gas prices. However, the rise in core consumer prices was a bit more of a surprise, largely due to higher prices for cars and trucks.

Key Takeaways:

  • The Consumer Price Index (CPI) for October rose by 0.3%, higher than the expected 0.2%, mainly driven by increases in energy costs and car prices.
  • The core consumer price index, which excludes food and energy prices, rose 0.2%, higher than the 0.1% expected.
  • Energy prices rose 1.5% in October, with the sharpest increases seen in gasoline and heating oil, which rose by 1.9%.
  • The prices of new cars were up 1.6% and used cars jumped by 3.4% in October.
  • This is the third consecutive month of sharply higher prices for used cars, following increases of 1.6% in September and 1.9% in August.
  • The huge decline in energy prices one year ago is rolling off, and this could lead to a divergence between the headline consumer price index and the core consumer price index in the near future.
  • Regular rent paid to landlords fell by 0.1% in October, and is down at a seasonally adjusted annual rate of 0.7% over the last three months.
  • OER, or "owners equivalent rent," was unchanged in October, and is off by 0.3% over the last three months.
  • Zacks Equity Research found that the decline in regular rents may be understated, according to reports from big housing-oriented REITs like Apartment Investors (NYSE: AIV) and Equity Residential (NYSE: EQR).
  • This trend has significant implications for the overall consumer price index, as regular rent and OER make up over 30% of the total CPI, and almost 40% of the core CPI.

Statistics:

  • The Consumer Price Index rose 0.3% in October.
  • The core consumer price index rose 0.2% in October.
  • Energy prices rose 1.5% in October.
  • Gasoline and heating oil prices rose by 1.9% in October.
  • The prices of new cars rose 1.6% in October.
  • The prices of used cars rose 3.4% in October.
  • Regular rent paid to landlords fell by 0.1% in October.
  • OER was unchanged in October.
  • The huge decline in energy prices one year ago is rolling off.
  • The overall consumer price index is down 0.2% on a year-over-year basis, while the core consumer price index is up 1.7% on a year-over-year basis.

Sources:

  • Zacks.com
  • Zacks Equity Research
  • Zacks.com is a property of Zacks Investment Research, Inc.
  • Leonard Zacks, PhD in mathematics