Cost of Living

October 2017

Consumer Price Index (CPI)

Consumer prices in the United States increased by 2.2 percent year-on-year in September 2017 (Consumer Price Index for All Urban Consumers CPI-U), above the 1.9 percent increase in August. The September number missed market expectations of 2.3 percent. For the month, the index increased 0.5 percent prior to seasonal adjustment (missing market expectations of 0.6 percent). 

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.3 percent over the last 12 months (Consumer Price Index for Urban Wage Earners and Clerical Workers). 

Core inflation rate for CPI-U, which excludes prices of food and energy, remained at a two-year low of 1.7 percent in September 2017.

Year to year changes in energy increased to 10.1%, a change of 6.4 percentage points from August 2017. The jump is attributed to hurricane-related production disruptions at oil refineries in the Gulf coast area. Prices rose for gasoline (19.3 percent from 10.4 percent in August) and fuel oil (15.6 percent from 9.4 percent).  Food prices increased slightly (1.2 percent from 1.1 percent) in August, while transportation services raised to 3.9 percent from 3.5 percent along with medical care services (1.7 percent from 1.6 percent). Prices in electricity (1.7 percent from 2.3 percent) and utility piped gas service (3.8 percent from 5.4 percent) decreased, respectively.

Medical care commodities decreased by 1.3 percentage points (1 percent from 2.4 percent in August) while the inflation rate of shelter declined slightly to 3.2 percent from 3.3 percent.  See Consumer Price Index, selected categories. 

Overall, it appears that core inflation (as measured by the CPI) increased when compared to earlier year to year change in inflation – from January 2017 to August 2017 (see year to year changes). The increase is largely attributed to the rise in gas prices (viewed by many experts as a temporary loss in refinery capacity). Looking forward, inflation is predicted to remain low in the near future.  

According to the Survey of Professional Forecasters, the inflation rate is expected to average 1.7 percent in 2017, increase to 2.2% in 2018, and rise to 2.3% by 2019. Over the next 10 years, 2017 to 2026, inflation will average 2.3 percent.  

In comparison to the current low unemployment rate (lowest in 16 years), the fear of high inflation due to wage pressure seems unwarranted. 

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