The good news, bad news about the October CPI

Price inflation has been moderating, and then…

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The good news about the October BLS inflation report is that prices were unchanged from a month ago. Excluding food and energy prices the index rose 0.2% in October.  For the 12 months ending in October, prices rose 3.2%, below the 2.0 % Federal Reserve “target,” but 4.0% if food and energy prices are excluded.  However, the fed uses the Personal Consumption Expenditure index as its preferred inflation scorecard. The next PCE report will be released on November 30. 

The October CPI revealed a 5.0% drop in gasoline prices. Great news for anyone with a long commute and businesses that operate a fleet of gasoline powered vehicles.  But transportation services rose 0.8 % in October and were up 9.2 percent from a year ago.  Shelter prices 0.3% last month and a robust 6.7% from a year ago.  Motor vehicle insurance jumped a whopping 19.2% from a year earlier.  In short, with food and energy prices jumping around month to month, there are price hikes that are still putting a financial strain on American family budgets.

The chart below was part of my Mises Circle presentation on November 4.  And what it reveals is that price movements are tracing out the same pattern trend as the last inflation cycle, 1966-1982. 

If the current cycle follows the same course, price inflation will moderate into 2024 and then accelerate for the next several years.  Is this guaranteed to happen?  Of course not, but economic history tends to repeat itself, maybe not exactly as past cycles had unfolded. Several factors could cause price inflation to accelerate sooner—war spending goes through the roof and the fed pumps trillions into the economy to support economic activity--or prices could decline markedly if there is a severe recession/depression.

In other words, the Federal Reserve is perpetuating the boom/bust cycle with its manipulation of interest rates and unlimited checking account.  And the federal government is running a $2 trillion budget deficit even though “Bidenomics” has created a “great economy.”  If you believe this, I have a bridge to sell you in Brooklyn.

I will be monitoring the CPI and the PPI, which will be released tomorrow.

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My early 2023 forecast, https://fortune.com/2023/03/27/recession-2023-layoffs-tech-finance-unemployment-outlook-fed-rates-murray-sabrin/?utm_source=search&utm_medium=advanced_search&utm_campaign=search_link_clicks.

This is an update of my 2021 forecast, https://fortune.com/2021/12/09/next-recession-heres-everything-bubble-markets-2021-2022-covid-murray-sabrin/ 

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Murray Sabrin, PhD, is emeritus professor of finance, Ramapo College of New Jersey. Dr. Sabrin is considered a “public intellectual” for writing about the economy in scholarly and popular publications. His new book, The Finance of Health Care: Wellness and Innovative Approaches to Employee Medical Insurance (Business Expert Press, Oct. 24, 2022), and his other BEP publication, Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide (October 2021), provides decision makers with tools needed to help manage their businesses during the business cycle.  Sabrin's autobiography, From Immigrant to Public Intellectual: An American Story, was published in November, 2022.