US Consumer Prices Increased in September on Rising Gasoline Costs

Gladys Abbott
October 14, 2017

It was the largest monthly gain since January.

Much of the rise was due to a sharp rise in gasoline prices.

Prices for other items rose very modestly.

When excluding volatile food and energy costs, so-called core prices increased 0.1%. Core CPI also disappointed, up 0.1% when 0.2% was forecast by economists.

On Wall Street worldwide trade talks boosted the materials sector while higher oil prices helped the energy sector and retail data helped consumer stocks, said Tim Ghriskey, chief investment officer of Solaris Asset Management in NY.

Oil prices closed at their highest level in October on bullish news from strong Chinese oil imports and after U.S. President Donald Trump decided not to certify Iran compliance with a nuclear agreement. But when excluding food and energy, prices rose 1.7% from a year earlier.

Silver was up 0.5 percent at $17.26 an ounce after hitting a three-week high of $17.35.

The data presents a mixed signal to Federal Reserve policy makers considering if the economy is ready for a third increase to the central bank's benchmark interest rate this year.

The inflation rate since the beginning of the year (September 2017 compared to December 2016) has been 0.7% and the annual inflation in September 2017 compared to September 2016 was 1.3%.

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The Fed targets a 2% annual inflation rate, as measured by the Commerce Department's personal-consumption expenditures price index.

"The firmness in retail sales should override the enduring mystery of low inflation to spur a December Fed rate hike", said BMO Capital Markets senior economist Sal Guatieri in Toronto.

"Hurricane effects are clearly visible - higher gasoline prices boosted gasoline station sales and strength can also be seen in other components as it is likely that there was some uplift as households start to replace lost items", said James Knightley, chief worldwide economist at ING. But that hasn't fully translated directly into higher US consumer prices, in part because technology is allowing Americans to find lower-cost products and wage pressures remain largely in check.

The year-over-year growth in core consumer prices also accelerated to 2.2 percent in September from 2.0 percent in the previous month.

Lukman Otunuga, research analyst at FXTM said: "Although US consumer prices made the largest increase seen in eight months on the back of rising gasoline prices, underlying inflation remained subdued".

USA crude rose 1.52 percent to $51.37 per barrel and Brent was last at $57.16, up 1.62 percent.

Meanwhile, Americans' inflation-adjusted incomes slipped for the second straight month, the Labor Department said in a separate report Friday.

Real average weekly earnings.

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