Weekly Economic Trends and Indicators

The Headlines:

The Bureau of Labor Statistics (BLS) recently reported that the consumer price index (CPI) increased by 0.3% in September on a seasonally adjusted basis. This level of inflation matched the average of the previous three months. The 12-month inflation rate of the CPI was 3.0% before seasonal adjustment, up from 2.9% for the 12 months ending in August.

The Details:

The federal government shutdown has halted most releases of economic data. However, the September CPI (normally released in early to mid-October) was released on October 24th because it was needed for the Social Security Administration to calculate the cost-of-living adjustment (COLA) for Social Security recipients for 2026.

Core inflation (all items except the more volatile food and energy components) fared slightly better in September, rising 0.2% after seasonal adjustment. Energy commodities, which had been falling in price for the last year as a whole, were up 3.8% in September, mostly because of gasoline (up 4.1%). Electricity and natural gas which have seen significant inflation over the last year (5.1% and 11.7%, respectively) retreated slightly during the month (down 0.5% and 1.2%, respectively). Food at home rose 0.3% in price.

Apart from food and energy, some of the categories seeing significant movement in price in September were apparel (up 0.7%), tobacco and smoking products (up 0.6%), and airline fares (up 2.7%).

The Context:

The bright spot of this report was that core inflation was slightly lower than overall inflation. If it had not been for the jump in gasoline prices in September the numbers would have looked somewhat better. However, over the last few months the inflation numbers might best be categorized as “not good enough.”

That is, these numbers are not enough to allow the Federal Reserve to signal another interest rate cut in December. Furthermore, they are not good enough to bring consumer expectations of inflation below 3%. Currently one-year-ahead inflation expectations are at 3.2% according to a survey from the Federal Reserve Bank of New York. More troublingly, five-year-ahead inflation expectations are 3.0% and have been trending up this year. Inflation expectations (one-year) were highest in the Midwest at 3.6%. This lines up with recent data on Midwest inflation that we noted last month.

At least some of this year’s inflation is likely due to tariffs as a large number of one-time price increases filter through the economy. As time goes on, that effect will diminish, which will slow inflation in food and consumer goods that have seen larger than usual price increases this year.

Next week: Alternative labor market measures