US CPI comes in above forecasts in September

The US Consumer Price Index fell for a second month in a row in September but was nevertheless stronger than expected when compared with year-ago levels.

The US Bureau of Labor Statistics reported the CPI dropped 0.2% month-on-month in September, in line with analysts’ predictions.

The energy index fell 4.7%, driven by the gasoline index falling sharply, and again was the main cause of the overall decrease.

In contrast, the index for food accelerated in the month, rising 0.4% - its largest increase since May 2014.

The indexes for shelter, medical care, household furnishings and operations, and personal care also increased, while apparel, used cars and trucks, new vehicles, and airline fares declined.

Barclays noted that declines in major categories such as apparel, new and used vehicles, medical commodities and tobacco were affected by other forces.

“[We see the] group of goods as being more influenced by imported price pressures, and their continued decline during September suggests that falling import prices and dollar strength continue to be passed through to consumer goods."

However Barclays believed headline CPI will start increasing on a month-on-month basis at the end of 2015.

“We maintain our view that the underlying trend in consumer prices remains benign, especially for services inflation, although we do not expect a strong upward trend to emerge in the near term.”

Year-on-year, the CPI was unchanged for the 12 months to September, down from a reading of 0.2% in August but nevertheless higher than expectations for a decline -0.2%.

At the core level, excluding the more volatile food and energy components, CPI advanced at a 0.2% month-on-month and 1.9% year-on-year clip.

The core readings were both one tenth of a percentage point more than expected.