US CPI data released, inflation numbers throw a surprise for the markets

The Bureau of Labor Statistics released the US CPI data for September today. The US inflation numbers for September slowed down but less than expected and US core inflation unexpectedly rose.

For the sixth consecutive month, the US annual inflation rate fell, from 2.5% in August to 2.4% in September 2024—the lowest level since February 2021—while still exceeding 2.3% of projections.

The food index rose 2.3% while the energy index fell 6.8%. The CPI increased by 0.2% over the prior month, matching August’s increase and surpassing estimates of 0.1%. The food index climbed by 0.4%, while the shelter index increased by 0.2%. When combined, these two indices accounted for more than 75% of the monthly rise in all products.

However, the surprise for the markets is that the annual core consumer price inflation rate in the United States, which excludes items such as food and energy, edged higher to 3.3% in September of 2024 from the three-year low of 3.2% recorded in the two previous months, and ahead of market expectations that it would stay at 3.2%.

Costs rose sharply for services less energy services (4.7%), which are closely monitored by the Federal Reserve for gauges on underlying inflation, amid high inflation for shelter (4.9%) and transportation services (8.5%). Every month, core consumer prices rose by 0.3%.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis, the same increase as in August and July, the U.S. Bureau of Labor Statistics reported today. The all items index rose 2.4 percent for the 12 months ending September, the smallest 12-month increase since February 2021.

The index for all items less food and energy rose 0.3 percent in September, as it did the preceding month. The all items less food and energy index rose 3.3 percent over the last 12 months.

In August, US CPI increased 2.5 percent annually and 0.2 percent monthly while the core inflation (all items less food and energy) rose 0.3 percent monthly and 3.2 percent over the last 12 months.

US CPI was expected to show an increase at an annual rate of 2.3% in September, down from the 2.5% rise reported in August. The core CPI inflation, which excludes volatile food and energy prices, is forecast to stay unchanged at 3.2% in the same period.

S&P 500 is up nearly 33% over 12 months and Dow 30 is up by 25% over the same period. The next 3-4 weeks may see increased volatility due to new economic data, US CPI data release, and US elections 2024. Despite a dead heat presidential election, many still expect Vice President Harris to occupy the Oval Office with a 52% odds.