NAA Inflation Tracker: October 2024

CPI, Latest Release, September 2024  

CPI came in a touch hotter than expected, rising 0.2% since August and 2.4% year-over-year, both 10 basis points higher than consensus forecasts. Food and shelter were the predominant factors behind the monthly increases, up 0.4% and 0.2%, respectively. The headline reading of 2.4% was the lowest since February 2021. Stripping out food and energy, core inflation matched last month’s increases at 3.3% year-over-year and 0.3% month-over-month. Prices for services are the main reason core inflation continues to be sticky. Airline fares, car insurance and car repairs all rose by more than 1.0% in September. 

CPI for Housing, September 2024 

The CPI includes two measures for shelter costs: owners’ equivalent rent (OER) and rent of primary residence, both of which are self-reported. Together, they comprise about one-third of CPI. After stagnating for the prior three months, both measures decelerated with rent increasing 4.8% year-over-year, its lowest rate since April 2022, and OER up 5.2%. Several private sector data providers continued to report monthly decreases in rent and very muted (less than 1.0%) growth year-over-year.

Super Core Inflation, September 2024 

Due mainly to lags in CPI shelter data, the Fed has begun to focus more on “super core” inflation, that is, prices excluding food, energy and shelter. Super core inflation surged from 1.6% year-over-year last month, which was a 3-year low point, to 2.1% in September. In addition to the aforementioned core inflation categories, prices increased for apparel, medical services, tuition, various household furnishings and textbooks.   

Inflation Expectations, August/September 2024 

The Fed tracks 21 different measures of inflation expectations. The data presented in the chart below are inflation expectations one year from now from the Federal Reserve Bank of New York’s Survey of Consumer Expectations (as of August 2024) and the University of Michigan’s Consumer Sentiment Index (as of September 2024). Consumers who took part in the University of Michigan’s survey expect an inflation reading of 2.7% twelve months from now, the lowest level since late 2020. Overall sentiment rose by 3.7 points over the past 2 months as consumers, noting inflation has slowed, become more optimistic about the economy’s future. Inflation expectations from the Fed’s survey have flatlined at 3.0% for the last 3 months. 

Wage Growth, September 2024

Wage growth, as measured by average hourly earnings, rose a healthy 4.0% year-over-year, remaining elevated by historical standards with the pre-2020 five-year average just 2.7%. The financial activities sector, including real estate, came in the middle of the pack in terms of the major employment sectors, up 4.2% year-over-year, its lowest rate of increase since April 2023.  

What to Watch in the Next Month 

According to the Fed’s forecast, updated at their September meeting, two more interest rate cuts of 25 basis points each are possible by the end of the year, which would leave the target rate in the 4.25% - 4.50% range. The forecasts for 2025 and 2026 call for a 100-basis point decrease each year. 

Next Tracker: November 13, 2024