WASHINGTON — The U.S. September CPI report was about as expected, showing surging energy costs made worse by seasonal adjustment, and otherwise modest core inflation pressures held down by lower auto prices.

September CPI printed up 0.6%, but core rose 0.1% (a 0.146% gain unrounded). Both numbers were 2.0% higher over the year.

Food prices rose 0.2% as nonalcoholic beverages and dairy rose but meats and poultry fell.

Energy prices jumped 4.5% in a second large rise and their second biggest gain since March. Gasoline printed up 7.0% in its third monthly gain, but was a "mere" 4.1% higher before adjustment. Natural gas and fuel oil prices also rose; ex energy CPI was just up 0.1%. Remarkably, energy costs are up only 2.3% over the year.

In core, medical posted a 0.4% gain (hospital care rose 0.6%), apparel grew 0.3% (on gains in women's-girls' clothing), and airfares jumped 1.4%. These offset used cars at a 1.4% decline (their biggest drop since February 2009) and new cars at a 0.1% slip, as well as dips in household furnishings and flat personal care costs (cosmetics down 0.5%).

Owners' equivalent rent gained 0.2%.

For purposes of the upcoming Social Security COLA, the Q3-Q3 CPI gain was 1.7%.

Overall the report shows inflation remained modest at around 2%. However, the CPI appears to have bottomed in July and is heading slightly higher. Where prices go from here will depend on whether the farm drought and oil hikes continue to affect the outlook.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

 

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