Report: October Inflation Hit Two-Year Low

Facts

• The US Consumer Price Index (CEI) slowed to 3.2% year-over-year last month, down from 3.7% in September and the lowest inflation rate since July. The 'core' measure of inflation, which leaves out fuel and food prices, dropped to 4% year-over-year, which was also lower than both the previous month and economists' predictions.¹
• While food prices were up 3.3% year-over-year as they continue to moderate, energy prices fell 4.5% from October 2022, including a 21% decline in fuel oil, 16% in natural gas, and 5% in gasoline. Other items that cheapened included major appliances dropping 10%, smartphones 12%, and eggs 22%, while sports tickets, car insurance, and car repair rose 25%, 19%, and 15%, respectively.²
• The Bureau of Labor Statistics report also showed new vehicles costing 0.1% less month-over-month, while used vehicles declined by 0.8% and were down 7.1% from a year prior. Airfare, too, dropped 0.9% on the month and 13.2% on the year.³
• As a sign of the Federal Reserve's (Fed) interest rate hikes working to correct the supply-demand imbalance, nonfarm payrolls in October jumped by just 150K, while real average hourly earnings — adjusted for inflation — jumped 0.2% on the month and 0.8% on the year. While economists expect gross domestic product (GDP) to slow considerably, the GDP also rose in the third quarter at a 4.9% annual rate.³
• In the wake of the news, the Nasdaq, S&P 500, and Dow Jones stock indexes were up solidly on Tuesday. As Treasury yields dropped, bond prices rose strongly.⁴
• This comes as the Fed, which has raised interest rates from nearly zero to 5.25% since March 2022, is now debating whether another quarter-point rate hike is necessary. Many economists and investors now believe the final rate bump is unlikely.¹

Sources: ¹New York Times, ²USA Today, ³CNBC and ⁴The Wall Street Journal.

Narratives

• Republican narrative, as provided by FOX News. While cooling inflation is good news to the average American, this news should not get Joe Biden's hopes up. Everyone from corporate economists to the average voter — 80% of whom currently think the economy is either 'fair' or 'poor' — is very aware of our high gas prices, grocery prices, and national debt. There are many reasons Biden is now lagging behind Trump in the polls, but the economic situation is going to be the hardest to distance himself from.
• Democratic narrative, as provided by Washington Post. While Americans haven't been able to separate Biden from their past two years of inflationary struggles quite yet, the fact is that the national economy has been roaring back quarter after quarter to the tune of rising employment, family net worths, and union worker wages — the last of which will play an important role for the president when facing off against Trump who has historically performed well with blue-collar workers. As economic stress continues to lessen, Biden and his 'Bidenomics' will be in a much better spot heading into the 2024 race.

Predictions