Inflation is taking a breather, after a dip in gasoline prices

In October, U.S. inflation chilled out quite a bit, coming in at 3.2% year over year, down from the 3.7% we saw in both September and August. And guess what? Economists who like to predict these things were pretty close, expecting a slight slowdown to 3.3%.

Breaking it down, the cost of living stayed pretty steady on a month-to-month basis. Economists had guessed we’d see a drop to 0.1% from the 0.4% increase in September.

Now, when we look at the core prices, which strip out the wackier stuff like food and energy prices, they went up by 0.2% for the month and hit 4% on a year-over-year basis. It’s worth noting that this core price growth is the slowest it’s been since September 2021. The experts thought we’d be stuck at 4.1% year over year and 0.3% monthly, so a bit of a win there.

For the big shots at the Federal Reserve who are trying to get inflation down to a cozy 2%, this is a step in the right direction. Especially considering the weaker October jobs report, it seems like plans for a December interest-rate increase might be put on hold.

Matt Eagan, a portfolio manager guy, thinks we might see inflation hit a 2% mark in the first half of 2024, thanks to a slowdown in spending and softer demand.

Oh, and there’s this thing called the “supercore rate,” which looks at core services inflation excluding housing. It was at 0.2% for October, down from 0.6% in September. This measure, closely watched by the Fed, slowed to 3.7% year over year from 3.9% in September.

Now, all of this was a bit surprising to the experts. They were expecting higher inflation levels due to some seasonal quirks and new data being tossed into the mix, especially related to health insurance costs.

Even though inflation took a chill pill last month, there are still some usual suspects causing trouble, like housing, motor-vehicle insurance, and personal care. Shelter alone accounted for a whopping 70% of the increase in core prices over the past year, according to Greg McBride, the chief financial analyst at Bankrate.

On another note, real average hourly earnings (that’s the money you make adjusted for inflation) went up by 0.2% from September to October. On an annual basis, earnings increased by 0.8%. But before we break out the confetti, keep in mind that the average workweek shrank by 0.9%, so workers didn’t see much change in their weekly pay over the past year.

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