US inflation has slowed to 3.2% year-on-year (y/y), and core inflation has also decreased to 4% y/y. These are the lowest rates since March 2021 for the overall Consumer Price Index (CPI) and since August 2021 for core inflation.
Historical Perspective
In October 2022, annualized growth was 7.8% and 6.3%, and in October 2021, it was 6.2% and 4.6%, respectively. The maximum rate of price growth was nearly 9% in June 2022 for CPI, and the peak for core inflation was reached in September 2022 at 6.6% y/y.
Recent Inflation Data
In October 2023, CPI rose by 0.04% month-on-month (m/m). The average monthly increase over the last 3 months is 0.36%, over 6 months is 0.26%, and over 12 months is 0.27%. The historical norm from 2015 to 2019 is 0.15%. In other words, price growth is 1.7 times the norm in the last six months.
Core Inflation Insights
Core CPI in October increased by 0.23% m/m. Over the past 3 months, the average monthly increase was 0.28%, over 6 months was 0.26%, and over 12 months was 0.33%. The norm from 2015 to 2019 was 0.17%. Therefore, core inflation is 1.5 times the norm over the past half-year.
October's 0.23% m/m growth in core inflation is not significantly different from the growth rate over the last 6 months (0.26%).
The lower growth rate of overall CPI is primarily due to a 5% drop in fuel prices over the month, which subtracted more than 0.15 percentage points from inflation.
Sector-Specific Analysis
Regarding other categories, the cost of nutrition (including food, beverages, and public catering) is growing above the norm. It increased by 0.295 m/m, over 6 months by 0.22%, while the norm is only 0.09%.
Education, medicine, communication services, information services, spending on autos, furniture, household items, electronics, machinery, equipment, and even spending on culture, sports, and the entertainment industry are no longer causing significant issues. In aggregate, the price growth for these items is either below the norm or at the level of the 2015-2019 norm.
Although household and personal services have approximately 2-2.5 times higher rates of price growth, their share in the CPI structure is insignificant at 3.5% to 4%.
Currently, the main problem is housing, with prices growing by 0.33% m/m in October, 0.42% in the past 3 months, 0.44% in the past 6 months, and 0.54% in the past 12 months. The norm is 0.27% m/m, but there has been a slowdown in the last six months.
Conclusion
Overall, U.S. inflation slowed to its lowest level since early 2021, with both the overall consumer price index (CPI) and core inflation falling significantly. While sectors such as food saw above-average price increases, key areas such as education, health care, and consumer goods stabilized, remaining either below or aligned with historical norms.