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“Slower Prices Ahead: October’s Inflation Report

The US Department of Labor recently released its inflation report for the month of October – and the numbers suggest that the growth of prices may be losing steam. Overall, the report showed the Consumer Price Index (CPI) was unchanged in October, compared with a 0.3% increase the prior month. This lack of growth in October’s inflation rate suggests that consumer prices are not rising at a steady or rapid pace, and is a departure from the more consistent increases seen throughout the year. The biggest contributor to the slowdown in inflation has been found to be energy prices. While prices in this sector usually follow seasonal trends, data show that the month saw a decrease in prices for items such as gasoline, natural gas, and electricity. Prices for motor fuel actually decreased by 0.7%, or 0.5% excluding food and energy prices. This implies that the recent drop in oil prices are being passed on to the consumer. In addition to the slowdown in energy prices, food prices actually fell for the first time since March this year. This reduction accounted for much of the decrease in the overall CPI rate, as food prices had been rising steadily for the past nine months up to October. Prices for core goods and services, however, rose in October, albeit at a slower rate than earlier in the year. Specifically, apparel, education, medical care, and personal care services had the most significant increases compared to last month. The numbers suggest that inflation is slowing down noticeably in the US economy, which could signal the end of a strong streak of price increases. While news of a decrease in prices may seem like cause for celebration to consumers, the slowdown could also lead to fears of an impending economic slowdown. The report, however, does offer some cause for optimism for those who believe in an economic rebound. With prices not rising much, consumer spending may get a much needed boost in the coming months. Although it is still too early to make any concrete predictions, the October inflation report will be closely scrutinized by economists in the coming days and weeks. Considering the uncertainty in the global economy, it will be interesting to see what this latest report has in store.