Consumer Inflation Lower Than Expectations in October, but Shelter up 0.3% Underscores Cost of Living Crisis

U.S. CPI was unchanged in October month-over-month (consensus 0.1%) following a 0.4% increase in September. Core CPI, which excludes food and energy, was up 0.2% month-over-month (consensus 0.3%) following a 0.3% increase in September. The shelter index, up 0.3%, again was the largest factor in the increase in core CPI. On a year-over-year basis, total CPI was up 3.2%, versus 3.7% in September, and core CPI was up 4.0%, versus 4.1% in September. This was the smallest 12-month change in core CPI since September 2021. The cost-of-living crisis deepens as real wages continue to suffer.

Treasury yields were sharply lower in response to the report. The 10-yr note yield, at 4.62% just before the data, fell to 4.46%. The 2-yr note yield, at 5.02% just before the release fell to 4.90%.


The bond market reacted knowing Powell said the Fed would be watching very closely in terms of core PCE. Core CPI goods inflation continues to drift down with falling consumer sentiment. We will look to the holiday shopping season with Thanksgiving, Black Friday and Cyber Monday all ahead next month.

US October 2023 Highlights


  • US CPI (M/M) Oct: 0.0% (est 0.1%; prev 0.4%)
  • CPI (Y/Y) Oct: 3.2% (est 3.3%; prev 3.7%)
United States Inflation Rate
United States Inflation Rate
United States Consumer Price Index (CPI)
United States Consumer Price Index (CPI) MoM

A reminder from August…

Core inflation:

  • CPI Core (M/M) Oct: 0.2% (est 0.3%; prev 0.3%)
  • CPI Core (Y/Y) Oct: 4.0% (est 4.1%; prev 4.1%)
United States Core Inflation Rate
United States Core Inflation Rate
United States Core Inflation Rate MoM

Real Earnings

  • Real Avg Hourly Earning (Y/Y) Oct: 0.8% (prevR 0.5%)
  • Real Avg Weekly Earnings (Y/Y) Oct: 0.0% (prevR 0.0%)

Where the Prices Changed

  • Energy costs dropped 4.5% (vs -0.5% in September), with gasoline declining 5.3%, utility (piped) gas service falling 15.8% and fuel oil sinking 21.4%.
  • Prices increased at softer pace for food (3.3% vs. 3.7%), shelter (6.7% vs. 7.2%) and new vehicles (1.9% vs. 2.5%) and continued to decline for used cars and trucks (-7.1%).
  • Prices rose faster for apparel (2.6% vs. 2.3%), medical care commodities (4.7% vs. 4.2%), and transportation services (9.2% vs. 9.1%).
  • Monthly lower gasoline prices (-5%) offset increases in prices for shelter (0.3%), natural gas (1.2%) and food (0.3%).

It appears the surge in prices is over with supply chains mostly healed. Services inflation is the directional key with consumer demand having shifted back toward services from goods.

Lower spending on goods, ongoing improvement in supply chains and falling shipping costs should continue to ease price pressures in coming months. The deflationary pull from improved supply chains will lessen with order now largely restored at US factories and ports. However, there are many possible shifts with the multiple geopolitical powder kegs out there with Russia and China.

A reminder we are coming off June 2022 9.1% inflation rate which was the highest in four decades. CPI has moderated after resurging in August with aggressive Fed interest rate rises.

The new data also reflects an update to the weights of goods and services in the spending basket to capture changes in consumer preference. The Labor Department previously updated every two years but starting with January’s release will revise them annually.

Services Inflation Peaked?

  • Services inflation in the United States eased for the eighth month to 5.16% year-on-year in September 2023, the lowest since March 2022, from 5.40% in the prior month.
United States Services Inflation

Market Reaction (updated)

Markets reacted by putting stocks are in rally-mode, reacting to a sharp drop in yields and the better-than-expected October CPI. After the market open the three major indices trade near their best levels so far with gains ranging from 1.3% to 2.1%. The Russell 2000 and S&P Mid Cap 400 are outperforming, trading up 3.4% and 2.7%, respectively.

28 of the 30 Dow components are higher and all 11 S&P 500 sectors sport a gain. The energy sector (+0.3%) shows the slimmest gain while the rate-sensitive real estate sector (+4.4%) leads the pack by a wide margin.

Fed Swaps Price In 50Bps Of Rate Cuts for July Policy Meeting

The 10-yr note yield is down 17 basis points to 4.46% and the 2-yr note yield is down 18 basis points to 4.86%.

The U.S. Dollar Index also took a sharp turn lower in response to the CPI data, down 1.1% to 104.49.

Shelter Costs Adding to Homeless

Shelter costs, the biggest services’ component and make up about a third of the overall CPI index.

Rent Inflation

Rent Inflation in the United States eased for the 7th straight month to 6.7% in October 2023, the lowest since September 2022, down from 7.2% in the prior month. Rent Inflation in the United States averaged 4.20 percent from 1954 until 2023, reaching an all time high of 20.85 percent in June of 1980 and a record low of -0.73 percent in April of 2010.

Housing Utilities

United States CPI Housing
US CPI Housing Utilities

Food Inflation Persistently High, But Falling

United States Food Inflation
US CPI Food inflation

Food inflation in the United States fell to an over two-year low of 3.3% year-on-year in October 2023, easing from 43.7% in the prior month and a peak of 11.4% in August 2022. Prices slowed down for food at home (2.1% vs 2.4% in September) and food away from home (5.4% vs 6%). Monthly, food prices went up by 0.3% in October, after a 0.2% increase in the prior month

Transportation Inflation Persists

United States CPI Transportation
US CPI Transportation Inflation

The effects of the coronavirus pandemic, then the supply crisis and throw in the Russian invasion of Ukraine on top have weighed on prices. Since many businesses closed and lockdowns were imposed, denting economic activity leaving the world vulnerable.  A jump in commodities and material costs, coupled with supply constraints pushed producer prices up and some companies are passing those costs to clients.

“I’m making more money…But I don’t see it because I’m paying more money for stuff now.” Low-wage workers are getting sharp raises. Inflation is eating them up. via Greg Ip WSJ

 Source: BLS BLS

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