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Consumer Price Index  
Released On 11/18/2009 8:30:00 AM For Oct, 2009
PriorConsensusConsensus RangeActual
CPI - M/M change0.2 %0.2 %0.1 % to 0.3 %0.3 %
CPI - Y/Y change-1.3 %-0.2 %
CPI less food & energy- M/M change0.2 %0.1 %0.0 % to 0.2 %0.2 %
CPI less food & energy - Y/Y change1.5 %1.7 %

Consumer price inflation was warmer than expected. Headline consumer price inflation firmed to a 0.3 percent boost after rising 0.2 percent the month before. The market had forecast a 0.2 percent gain. Core CPI inflation was unchanged with a 0.2 percent increase and was above consensus expectations for a 0.1 percent rise. But some of core strength appears to be temporary.

First, boosting the headline number was a 1.5 percent jump in energy prices after a 0.6 percent rise in September. Gasoline was up 1.6 percent, following a 1.0 percent increase. Food price inflation was restrained in October with a 0.1 percent rise, following a 0.1 percent dip the month before.

The core rate was driven up by vehicle prices for the most part. According to the BLS, the indexes for used cars and trucks and for new vehicles both rose sharply and together they accounted for over 90 percent of the increase in the index for all items less food and energy. The index for new & used vehicles jumped 1.7 percent after a 0.5 percent rise in September. The indexes for airline fares and medical care also increased, by 1.7 percent and 0.4 percent, respectively. Indicating softness in the underlying trend for the core, the shelter index was unchanged and the indexes for apparel and recreation declined.

Year-on-year, headline inflation increased to minus 0.2 percent (seasonally adjusted) from down 1.3 percent in September. The core rate firmed to up 1.7 percent in October from up 1.5 percent in September. On an unadjusted year-ago basis, the headline number was down 0.2 percent in October while the core was up 1.7 percent.

Overall, inflation outside of energy likely is not accelerating but neither is it as subdued as the Fed probably prefers. Treasury yields generally firmed on the news despite lower housing starts announced at the same time.

Consensus Outlook
The consumer price index at the headline level in September eased to a 0.2 percent gain after jumping 0.4 percent in August. The slowing was due to a dip in food prices and a dramatically slower gain in energy costs. Core CPI inflation firmed slightly, rising 0.2 percent after a 0.1 percent increase in August. Higher oil prices indicate that the headline CPI will be firm in October.

The Consumer Price Index is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.

The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group, representing about 87 percent of the population. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.

The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.

The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.  Why Investors Care
It is always a good idea to look at more than a few months of data to get a sense of changes in established trends. Monthly changes in the CPI are mainly volatile because of sharp fluctuations in food and energy prices. The core CPI eliminates the sharper fluctuations.
Data Source: Haver Analytics
Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core CPI does not fluctuate as much as the total CPI.
Data Source: Haver Analytics

2009 Release Schedule
Released On: 1/162/203/184/155/156/177/158/149/1610/1511/1812/16
Release For: DecJanFebMarAprMayJunJulAugSepOctNov

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