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Economists overestimated the hurricane impact according to Bloomberg Econoday.

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Moderation in both housing and medical costs is the dovish story behind September's consumer price report, factors that held down the core rate to a lower-than-expected 0.1 percent gain. The core excludes food and also energy which spiked a hurricane-driven 6.1 percent to lift the overall rate to an outsized looking 0.5 percent.

But it's the fundamental costs that look soft in September's report. Housing rose only 0.2 percent in the month, which is half of August's gain, with the closely watched owners' equivalent rent component slowing 1 tenth to 0.2 percent. Medical care actually went into reverse at minus 0.1 percent. Prescription drugs were very soft here, down 0.6 percent with nonprescription drugs down 1.4 percent. Apparel is also in the negative column at minus 0.1 percent to end a positive run of gains while both new and used vehicles fell, down 0.4 and 0.2 percent respectively.

Positive traction includes wireless services which have been moving in reverse most of the year though posting a 0.4 percent September rise. Recreation posted a 2nd straight 0.2 percent gain while food was a non-factor once again, up 0.1 percent.

Year-on-year rates won't be alarming the hawks at the FOMC, down 1 tenth to 2.2 percent overall and holding, for a 5th month in a row, at a subpar 1.7 percent for the core. This report, which did show pressure in August, is not showing the same pressure in September and offsets, at least to a degree, the significant signs of wage pressures in September's employment report. Today's report will soften the inflation debate at the month-end FOMC. The Department of Labor is downplaying any hurricane impacts on the report though it does note that data collection in Florida was impacted slightly.

Percent Changes in CPI

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Year-over-year commodities excluding food and energy, new vehicles, used vehicles, and apparel are lower.

Month-over-month, add natural gas and energy services to the list.

Shelter is up as is transportation services (taxis etc), and food away from home. On balance, the Fed and economic illiterates cheering inflation as a benefit will not be pleased with the report.

Mike "Mish" Shedlock