It’s a mixed bag of consumer price data, with the annual inflation rate continuing to cool in September, reaching its lowest level in three years, though the report was slightly hotter than expected.
The Labor Department reported on Thursday the consumer price index (CPI) — a broad measure of the cost of everyday items — rose by 0.2% in September from the previous month and was up 2.4% from a year ago.
Economists predicted that inflation would slow to 2.3% annually and rise 0.1% month-to-month.
Core prices, which exclude more volatile categories such as gasoline and food, increased by 0.3% on a monthly basis and 3.3% compared to a year ago — slightly above the economists' forecast of 0.2% and 3.2%, respectively.
High inflation has put significant financial pressure on most U.S. households. Price hikes are especially tough on lower-income Americans, who tend to spend a larger portion of their paycheck on necessities, leaving less room for saving.
A big part of the rise in core inflation in September came from shelter costs rising 0.2% compared to August. Over the past year, shelter prices are up 4.9%, accounting for over 65% of the total 12-month increase in the core inflation (excluding food and energy).
Other areas with notable price increases over the past year include vehicle insurance (+16.3%), medical care (+3.3%), personal care (+2.5%) and apparel (+1.8%). Food prices also went up, increasing by 0.4% on a monthly basis and 2.3% year over year.
Overall, the report shows that inflationary pressures in the U.S. economy are continuing to ease, though prices remain above the Federal Reserve’s 2% target. This keeps the Federal Reserve on course for its next interest rate cut. The U.S. central bank is set to meet in November and is expected to lower borrowing costs by another 25 basis points.
Markets however didn’t celebrate the slowing price growth. Instead, stocks showed mixed reactions, with a modest selloff happening right after the report was released. Later, buying picked up, and the three major indexes — S&P 500, Dow, and Nasdaq — recovered most of their intraday losses but still closed in the red. Meanwhile, the U.S. dollar strengthened, with DXY rising above 103, marking its ninth consecutive day of gains.
Policymakers have also expressed concerns about growing risks in the labor market, and for good reason.
Initial unemployment claims took an unexpected jump, hitting a seasonally adjusted 258,000 for the week ending October 5. That is the highest total since August 5, 2023, with a gain of 33,000 from the previous week, well above the forecast of 230,000.
Continuing claims, which are tracked a week behind, rose to 1.861 million, an increase of 42,000.
The jobless claims figures follow the damage from Hurricane Helene, which hit on September 26 and affected much of the Southeast. Florida and North Carolina, two of the hardest-hit states, posted a combined increase of 12,376.
A strike by 33,000 Boeing workers may have also influenced the numbers. Michigan saw the largest increase in claims, up by 9,490 for the week.
