Inflation breakdown – Not as bad as it seems

What drove the CPI?

The table below examines what drove September’s CPI, both on a monthly and annual basis. Let’s summarize how the data ended today from the macro-calendar:

The YoY headline inflation (CPI) in September rose to 8.2%, down from the previous month’s 8.3% but more than the consensus estimated at 8.1%. The monthly rise contributed an additional 0.4% growth, thus beating the estimate of 0.2%. The one pure negative sign.

The Core PCE or a similar Core CPI is the most important (lagging) inflation indicator for the Fed. The core CPI rose to 6.6%, up from the previous month’s 6.3% and also higher than the consensus estimate of 6.5%. The monthly Core CPI is the most crucial part of the whole CPI report. It showed that MoM Core ended up up by 0.6%, the same as the previous month. This was more than the estimate of 0.5%, so it was hotter than expected. 

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There is a legitimate concern that inflation becomes more structural, mainly in a core way. We do not know if it is that way or not. However, we can look at the table below to summarize what ensured such strong figures.