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Labor is tight, but prices are calm, contrary to what the Philips Curve describes.



September 2018 Consumer Price Index, October UI Claims

October 11, 2018
By Robert A. Dye, Ph.D., Daniel Sanabria

Consumer Prices Tame

*     The Consumer Price Index for September increased by 0.1 percent.
*     Initial Claims for Unemployment Insurance gained 7,000, to hit 214,000 for the week ending October 6.

Labor is tight, but prices are calm, contrary to what the Philips Curve describes. Trade tariffs are adding price pressure to specific products, but that is not showing up in the headline numbers. Price indexes remained calm in September indicating that inflation is well contained. Yesterday the Producer Price Index for September showed a 0.2 percent monthly gain. Today, we see that consumer inflation was sedate in September as the Consumer Price Index gained just 0.1 percent for the month. Consumer food prices were unchanged. Energy prices fell by 0.5 percent. We expect to see hotter energy prices in October reflecting tighter crude oil markets. Outside of food and energy, core prices also gained just 0.1 percent for the month. Over the previous 12 months the headline CPI is up by 2.3 percent, clearly past its peak year-over-year change of 2.9 percent from last June and July. Core CPI was up 2.2 percent in September over the previous 12 months.

Initial claims for unemployment insurance increased by 7,000 for the week ending October 6 to hit a still-very-low 214,000. Continuing claims gained 4,000, reaching 1,660,000 for the week ending September 29, also a very low number consistent with a very tight labor market.

Market Reaction: U.S. equity markets opened with losses following the sell-off yesterday. The 10-Year Treasury bond yield is up to 3.17 percent. NYMEX crude oil is down to $72.13/barrel. Natural gas futures are down to $3.21/mmbtu.

For a PDF version of this report, click here: September 2018 Consumer Price Index, October UI Claims

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