Updated Nov 10, 2022 - Economy

Inflation cools more than expected in October

Year-over-year change in Consumer Price Index
Data: Bureau of Labor Statistics; Chart: Axios Visuals

After months of worrying inflation readings, there's finally some good news: Consumer prices cooled in October, and there are encouraging clues they will cool further in the coming months.

Why it matters: The nation's price pressures are by no means resolved; they remain painfully high. But last month's moderation is a hopeful sign of easing inflation alongside a still healthy economy.

What they're saying: "The October CPI report renews some hope that a soft-ish landing might be achievable," Evercore ISI's Krishna Guha wrote in a note.

By the numbers: The Consumer Price Index cooled more than expected in October: it rose 7.7% from a year earlier, down from 8.2% the prior month, the Labor Department said on Thursday.

  • There was a sharp deceleration in core inflation, a key gauge that strips out food and energy costs. It rose 0.3% last month, after rising 0.6% in September.
  • On an annualized basis, core prices rose 3.3%. That's still much too high for the Federal Reserve's comfort, but it's an improvement from previous months.

What's going on: Economists had been bracing for a significant slowdown in goods inflation as supply chain issues ease and consumers shift spending patterns. Finally, that slowdown happened in a notable way last month.

  • A measure of goods inflation that excludes food and energy turned negative, for only the second time since February 2021. It fell 0.4%, helped by falling prices for apparel and used vehicles.

The concern in recent months has been inflation building on the other side of the economy — the services sector, where costs can be stickier. Prices overall rose more slowly there, too, thanks to the anticipated decline in health insurance costs, along with cheaper airfare.

  • Shelter is still the inflationary boogeyman, but private sector data offers encouraging results that rent and home prices are on the decline. That will be slow to feed through to official government data.

Yes, but: This is just one month's data, and there is no guarantee there won't be other shocks that push prices back up.

  • The Fed has said it wants to see consistent signs inflation is slowing down to be sure this month's report isn't a blip.
  • This summer, there were hopes inflation was turning the corner. That optimism was crushed after subsequent high readings proved that was not the case.
Go deeper