The October inflation report in the United States is expected to show a slower pace of price growth compared to the previous month. This follows a period of higher inflation earlier in the year as supply chain disruptions hit the economy. In September, the Consumer Price Index (CPI) rose 0.6 percent, extending a string of increases stretching back to the spring.
Economists expect CPI to show a 0.2 percent increase in October. This would be slightly lower than the 0.4 percent rise in CPI from August to September. The slowing of inflation will be welcomed by economists, as higher prices can eat into spending power which can curtail economic activity.
The main driver of the slowdown in inflation is expected to be a moderation in prices for housing, cars, and apparel. These items are typically sensitive to the overall economic outlook, and as the US economy continues to struggle due to the pandemic, rising prices have tapered off.
Excluding the volatile food and energy categories, core CPI should show a 0.2 percent rise in October, according to economists’ forecasts. Core CPI excludes the two volatile categories to better track underlying inflation trends. The Federal Reserve’s preferred metric for inflation – the Core Personal Consumption Expenditures (PCE) index – is also expected to show a moderation in prices. The Fed targets inflation at 2 percent and policymakers will be looking to the October report to see if prices are following this path.
Overall, the October inflation report should provide some optimism for economic recovery. While there is still volatility and uncertainty in the economic outlook, slower inflation can provide some support for consumer spending. This can mean more economic activity and job growth in the months ahead.