NAA Inflation Tracker: October 2023

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CPI, Latest Release, September 2023  

The September inflation release came in slightly higher than expected, rising 3.7% year-over-year and 0.4% over the month, seasonally adjusted. Shelter costs were responsible for more than half the increase. Gas prices were also a major contributor, rising 2.1% month-over-month compared to 10.6% in August. Once again, the good news came by way of core CPI (excluding food & energy) which rose 4.1% year-over-year, the lowest reading in two years.


consumer price index as of september 2023


CPI for Housing, August 2023

The CPI includes two measures for shelter costs: owners’ equivalent rent and rent of primary residence, both of which are self-reported. Together, they comprise about one-third of CPI. Shelter cost increases continued to decelerate on a year-over-year basis but ticked up slightly since last month. Year-over-year rent increases are at a 12-month low of 7.4%. Private sector data firms are tracking rent growth ranging from declines of 1.2% (Apartment List) to 0.8% growth (Yardi Matrix), illustrating just how far CPI measures can be expected to come down in the near term.  


cpi shelter costs as of september 2023


“Super Core” Inflation, August 2023

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 was another bright spot in this month’s reading, rising just 2.0% from last year. It is down 560 basis points from the peak in February 2022. Price increases were driven by car insurance, recreation, personal care and new vehicles. Prices declined for used cars and trucks as well as apparel.


cpi less food, shelter, and energy as of september 2023


Inflation Expectations, September 2023

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 and the University of Michigan’s Consumer Sentiment Index.

Although both measures are generally trending downwards, the University of Michigan index hit a 30-month low at 3.2%. The Fed’s index has ticked up 10 basis points in each of the last two months and stands at 3.7%. Consumers expect prices to increase for food, but decline for gas, rent, medical services and college tuition by this time next year.  


inflation expectations one year from now, as of september 2023


Wage Growth, September 2023

Wages, as measured by average hourly earnings, rose 4.2% year-over-year, the lowest rate of growth since June 2021. Wages have cooled considerably over the past three months, with growth down by more than half. As was the case last month, the largest monthly gain occurred in the financial activities sector, which includes real estate, up 0.4% this month and 4.9% year-over-year. The only category posting a monthly decline was the information sector as some tech companies continue to struggle while the impacts of A.I. have not yet been revealed in the data. Real earnings, which take inflation into account, for private sector workers fell by 0.2% in September.  


wage growth as of september 2023


What to Watch in the Next Month

  • The Federal Open Market Committee meeting minutes from September, released yesterday, were fairly split between FOMC members who anticipate the possibility of one more rate increase this year versus those who think interest rate hikes are over. The next meeting concludes on November 1.
  • The economic projections showed mostly good news related to GDP and the labor market, but the forecast for the Federal Funds Rate rose 50 basis points in both 2024 and 2025, indicating both a long pause in interest rate policy and slow rate cuts ahead.


Next Tracker: November 14, 2023