The Everyday Price Index (EPI), calculated and published monthly by tne American Institute for Economic Research, declined 0.46 percent to 289.6 in September 2024. This is the third monthly decline in the index since January 2024 and the third time this year that the EPI and our core CPI proxy have diverged on a monthly basis. The divergence is also the largest seen since May 2023.  

AIER Everyday Price Index vs. US Consumer Price Index (NSA, 1987 = 100)

Among the twenty-four EPI constituents, eleven declined, twelve rose, and one was unchanged from the prior month. The decline in the EPI in September 2024 was driven by the over five-percent decline in motor oil prices, without which the index would have risen roughly 0.1 percent.

On October 10, 2024, the US Bureau of Labor Statistics (BLS) released its September 2024 Consumer Price Index (CPI) data. The month-to-month headline CPI number rose by 0.2 percent, higher than expectations of an 0.1 percent increase. The core month-to-month CPI number increased by 0.3 percent, higher than the forecast increase of 0.2 percent. 

In September, the shelter index increased by 0.2 percent and the food index rose 0.4 percent; those two categories drove over 75 percent of the monthly inflation increase. The food at home index went up 0.4 percent, and food away from home rose 0.3 percent. Meanwhile, the energy index dropped 1.9 percent for the month, continuing its decline from the previous month’s 0.8 percent drop. The core (excluding food and energy) rose 0.3 percent with higher prices in shelter, motor vehicle insurance, medical care, apparel, and airline fares. Declines were seen in recreation and communication costs.

In the food category, five of six major categories increased. Meats, poultry, fish, and eggs rose 0.8 percent, led by an 8.4 percent spike in egg prices. Fruits and vegetables climbed 0.9 percent, reversing a 0.2 percent drop in the previous month while cereals and bakery products increased by 0.3 percent. 

Energy saw significant changes as gasoline prices plummeted 4.1 percent. Electricity and natural gas indexes, on the other hand, rose by 0.7 percent. Medical care, which had been falling for two months, reversed with a 0.4 percent increase. Motor vehicle insurance, a major culprit in core increases in the US cost of living, surged another 1.2 percent with airfares spiking 3.2 percent. Recreation prices fell 0.4 percent, and the communication index dropped 0.6 percent.

Sept 2024 US CPI headline & core month-over-month (2014 – present)

Headline CPI rose 2.4 percent, beating forecasts for a 2.3 percent rise. Year-over-year core CPI rose higher than expected as well, with the September 2023 to September 2024 rise coming in at 3.3 percent versus the forecast 3.4 percent.

Sept 2024 US CPI headline & core year-over-year (2014 – present)

The 2.4 percent increase in the year-over-year headline number is the smallest annual increase since February 2021. Excluding food and energy, the CPI rose 3.3 percent. Both, however, were 0.1 percent higher than surveys expected.

Over the past 12 months, the energy index dropped 6.8 percent, led by sharply falling gasoline prices (down 15.3 percent) and fuel oil (down 22.4 percent). The cost of electricity, however, rose by 3.7 percent with natural gas seeing a more modest rise of 2 percent. The food index increased by 2.3 percent overall, driven by a 1.3 percent rise in food at home and a 3.9 percent jump in food away from home. Limited service meals saw a 4.1 percent hike, while full service meals also climbed 3.9 percent. Among specific food categories from September 2023 to September 2024, meats, poultry, fish, and eggs surged just under 4 percent, nonalcoholic beverages rose 1.3 percent, and smaller gains registered in both fruits and vegetables (0.7 percent) and cereals and bakery products (0.1 percent).

Excluding food and energy, the core year-over-year index experienced notable increases, particularly in the shelter category, which rose by 4.9 percent. That surge contributed over 65 percent of the annual increase in this category. Motor vehicle insurance jumped by 16.3 percent and medical care increased by 3.3 percent. Personal care and apparel costs also grew, but more modestly, by 2.5 percent and 1.8 percent, respectively. These changes reflect the broader inflationary pressures affecting essential goods and services over the past year.

September’s CPI report presents a mixed outlook on inflation. The positive news is that disinflation in rent prices appears to be picking up steam. More negatively, inflation remains stubbornly high in key service sectors such as car repairs and insurance, where price increases continue to persist. Stickiness in service prices are tempering hopes for rapid disinflation overall.

While the aforementioned stickiness in services is somewhat to be expected, disinflation in the prices of core goods stalled out in September 2024 after six months of decline. A major portion of that deceleration was driven by transportation related prices, with used car prices rising by 0.3 percent (reversing August’s 1.0 percent decline) and new car prices increasing 0.2 percent. To some extent this was anticipated, with seasonal factors for car prices shifting unfavorably in the last quarter of the year. Those seasonal effects may hinder disinflation efforts in coming months unless overtaken by substantial declines in sticker prices – an unlikely factor, given the increasing hesitation among spending-weary US consumers.

Looking forward, there are mixed signals for inflationary trends. Shelter-related inflation measures are slowing and elevated wholesale inventories could lead to holiday discounts in core goods. Inflation in services like car insurance and repairs remains troubling. On top of that, the breadth of inflation pressures has steadied with fewer core categories experiencing deflation and a growing share of categories seeing annualized inflation above 4 percent. A concern now is whether US inflation is becoming entrenched above the Fed’s target level. If so, the question becomes whether and to what extent the recent policy shift toward accommodation complicates a disinflationary resumption.