The Labor Department’s recent report revealed a notable decline in US inflation, mainly driven by a drop in petrol prices last month, marking its lowest rate since July.
“Prices increased at a rate of 3.2% over the 12 months to October,” stated the Labor Department, reflecting a decrease from the previous 3.7%.
Despite climbing housing costs, the overall price pressures were milder than anticipated, indicating a potential easing in the country’s battle against inflation.
“The October price index, which measures a basket of items, remained unchanged from September. However, when excluding food and energy prices, there was a modest 0.2% increase, a slight ease from the prior month,” revealed the report.
This news led to a surge in stocks as investors anticipated a potential halt in further actions by the US central bank to tackle inflation.
“The continued moderation of inflation will help keep the Federal Reserve on the sidelines,” Greg McBride, chief financial analyst at Bankrate.com, told BBC.
Furthermore, petrol prices notably dropped by more than 5% since last year, contributing to the overall reduction. Additionally, prices for new and used cars and trucks also witnessed a decline.
Yet, despite these fluctuations, concerns persist, particularly regarding housing costs, which have surged by 6.7% over the last year, accounting for a significant portion of last month’s inflation.
“The slower pace of inflation is little comfort to households still dealing with the cumulative effect of rising prices,” McBride acknowledged, emphasizing the strain on household budgets.
Housing costs, including rents, hotel rates, and household insurance, heavily impact US inflation calculations. While home sale prices aren’t factored in, the index includes an estimated figure called “owners’ equivalent rent” to gauge homeowners’ potential rental expenses.
In light of this, analysts noted a delay in reflecting the changing rental market within the official inflation data, citing the lag in leases locking in rates.
“There are signs now that shelter costs, which were surging earlier, are starting to stabilize or even decrease,” observed Orphe Divounguy, senior economist at Zillow, expressing optimism about the rental market normalizing.
However, some caution remains, as Sarah House, economist at Wells Fargo, according to a BBC report, cautioned that while housing cost increases might slow in the coming months, the steady rate of primary rent inflation might not ease as sharply as private sector measures have indicated.
