Summary: CIBC gives its perspective on the US CPI data for September, observing that while the report matches expectations, the details unveil a significant variance between the rise in services inflation and the dip in goods prices.
Data Overview: The September CPI data met anticipations with core inflation registering a 0.3% m/m rise. On an annual scale, core inflation reduced to 4.1% from the preceding month's 4.3%. Headline inflation mirrored the core, also recording a 0.3% m/m increment, with yearly rates slightly declining to 3.6% from August's 3.7%.
Services vs Goods: Core services inflation, mainly fueled by elevated shelter expenses, saw an uptick in September, rising from August's 0.4% to 0.6%. Non-housing services, a favorite metric of the Fed concerning consumer demand, ascended by 0.5% m/m. In contrast, the normalization of the supply chain and the downturn in used car values resulted in core goods prices diminishing by -0.4% in September.
Implications for the Fed: These contrasting inflationary trends present the Federal Reserve with a multifaceted situation. On one hand, there's robust inflation driven by heightened demand, while on the other, renewed supply is curbing inflationary pressures. Such a dichotomous scenario poses a challenge for the Fed as it contemplates its next steps in November.
Closing Thoughts: The recent US CPI figures for September offer a nuanced inflation narrative, intertwining firm consumer demand with rejuvenated supply. This complexity could present a puzzle for the Federal Reserve as it decides on future policy measures.