Tame September CPI? How Tame? 
Here’s a headline that caught my eye: S&P 500 hits all-time as tame inflation gives ’all clear’ for October rate cut
The market is giddy alright, but how tame is tame? Let’s discuss some charts.
The CPI Rose 0.3 Percent in September
The BLS reports the CPI Rose 0.3 Percent in September, a bit lower than the Bloomberg Econoday consensus of 0.4 percent.
The BLS reports to a single decimal place. I calculate two decimal places.
CPI Month-Over-Month Percent Details
- All Items: 0.31
- All Items Except food and Energy: 0.23
- Food and Beverage: 0.25
- Food Away from Home: 0.14
- Food at Home: 0.32
- Shelter: 0.21
- Owners’ Equivalent Rent (OER): 0.13
- Rent of Primary Residence: 0.20
- Medical Care Services: 0.28
- Medical Care Commodities: -0.06
- Energy: 1.51
- Gasoline: 4.06
Delayed Report
This report is very late. But it’s accurate to the normal extent of BLS accuracy (which isn’t saying much) because the data was already collected before the government shutdown began.
The October report due in November will be certified garbage.
What’s Going On?
Trump Recalls BLS Workers to Produce CPI Report
CPI data for September is needed for annual Social Security cost of living calculations (COLAs).
Trump was forced to recall enough BLS workers to compile the collected data.
I discussed this on October 10, in Trump Recalls BLS Workers to Produce CPI Report Because SS Payments Need It
So, there is no conspiracy here, just normal BLS reporting.
CPI and PCE Year-Over-Year Percent Change
PCE stands for the Personal Consumption Expenditures price index. It is the Fed’s preferred measure of inflation.
PCE data for September is postponed due to the shutdown.
CPI and PCE Year-Over-Year Details
- CPI: 3.0 percent
- Core CPI: 3.0 percent
- PCE (August): 2.9 percent
- Core PEC (August): 2.9 percent
CPI Year-Over-Year Percent Change
CPI Year-Over-Year Details
- CPI: 3.0 percent
- Core CPI: 3.0 percent
- Food and Beverages: 3.0 percent
- Owners’ Equivalent Rent (OER): 3.8 percent
- Rent of Primary Residence: 3.4 percent
Is any of that tame? What about the current month?
Annualized CPI at Current Monthly Rate
CPI Annualized Current Month Details
- CPI: 3.8 percent
- Core CPI: 2.8 percent
- Food and Beverage 3.0 percent
- Shelter: 2.5 percent
Is the CPI at 3.8 percent tame? How about core CPI at 2.8 percent with targets of 2.0 percent.
What’s the Real Problem?
That question gets to the heart of the matter. And it is much worse than my charts show.
While everyone rails against BLS data collection methods and procedures (with good cause), that is not the fundamental problem.
Rather, the fundamental problem is the makeup of the CPI and PCE itself.
The CPI consists of items directly paid for by consumers. The PCE contains items indirectly paid for by consumers, notable Medicare and corporate health insurance.
They are both flawed because neither includes home owners’ insurance or property taxes.
And the BLS percentage weights for food are nonsense.
Nonsensical BLS Chart
The BLS says the cost of homeowners insurance index has risen form 151 to 165 since January of 2020.
That’s an increase of 9.3 percent. But all the BLS counts is insurance for contents, not fire, flood, or hurricane damage to the building.
Let’s now discuss food.
BLS Percentage Weights in December 2024
- Food at Home: 8.04
- Food Away from Home: 5.64
USDA Actual Spending Weights
- Food at Home: 5.68
- Food Away from Home: 8.01
Note the BLS food weights for home vs away are reversed from where people actually spend their money.
For more details, please consider Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?
Does the BLS match your budget?
The Key Mistake
Finally, please consider Is Homeowners Insurance Understated in the CPI? Shop Around! This is the key BLS mistake.
Our Insurance went up by $2,000. Then another $2,000. Here’s our story.
But look on the bright side, Trump Says There Is ‘Virtually No Inflation.’
Homeowners’ insurance, and property taxes, and food are three reasons the CPI is garbage.
Better collection mechanisms will not and cannot fix this fundamental problem.
Worse yet, the Fed, Trump, and the overwhelming majority of economists do no even understand the problem.
But hooray! The CPI was tame. I made a note.
After the mortgage crisis, the Fed’s scheme was for the BLS to engineer their measure of inflation to 2 percent. 2 percent was low enough to prevent a labor cost of living spiral, while the Fed flooded the economy with fiat. A 2 percent measure of inflation limited household wage increases to 3 percent annually for a decade after the crisis. Raises for union and government employees are linked to the measure of inflation, seasoned employees are given 1.5 percent the rate. A 3 percent inflation reading, increases yearly raises to 4.5 percent per year. The increase will pass down to consumers. Entitlement programs as SS, federal retirement, welfare also increase by 50 percent. Individually, 3 percent increase will not cover the actual rise in cost expenditures. But, as a whole, the 50 percent increase in payments add to an already stressed government debt.
My health insurance package went up 8% overall for my employees last year. This year I am being quoted 22% ~ 37% more for an equal package or a package that includes dental and increased drug coverage.
Vehicle insurance has nearly doubled in two years and homeowners is up 40%, with no claims on either.
Great commentary Mish. All this boils down to the Fed making moves contrary to supporting their congressionally mandated objectives: namely stable prices, not 25 increases annually and full employment. Fed members are not stupid; I am positive they full well know they are doing wrong by their objectives and the long term good of the nation. Question becomes why, a couple suggestions:
The fed is owned by its member banks; it is not Federally owned. I believe they are taking care of the owners with all the various bail outs and other direct assistance and if that means abandoning their congressional objectives, so be it. After all there are no penalties in any legislation for failure to meet objectives.
They have via the Greenspan put that seems to continue to this day, to lower interest rates for any problem real or perceived, and various forms of QE, enabled congress to spend without immediate consequence so that is exactly what congress did, and we now have in rough numbers $38 trillion debt and $2 trillion annual deficits requiring a trillion dollars per year for interest payments. It is unsustainable and the only way to fix the problem is to cut spending to less than revenue and start chipping away at the debt. That requires hard choices by congress that they likely will not make, so the fed has taken it upon themselves to keep the servicing cost low as possible no matter how damaging to the country long term.
One thing to note, taking the easy route by artificially keeping national debt service costs low may reduce the pain currently, but what is not sustainable will not endure. The pain will come more violently at a later time and congress will not be choosing where cuts are made, the market will.
2% increases
That may be the figures, but groceries are way above 3%. To those living on a budget the data means nothing. They know how they feel when they reach the check out. This disconnect between what Biden was saying and people felt was his downfall. Trump should be a better listener.
Wolf: OER reflects homeowners insurance, HOA fees, property taxes and maintenance.
BLS disagrees, see their web info or my comment quilting it on Wolf’s site.
It doesn’t
The Fed does not care about the data. Their 2% inflation target is pure fiction.
The data shows CPI has risen for the fifth month in a row and is clearly on an upward swing.
The Fed does not care about inflation; it cares about what’s best for the big banks. That means more rate cuts are on the way.
In Nov, brand new 2025 models becomes used cars. Dealers parking lots, including safe parking lots, are loaded. During thanksgiving car mfg push 2025 models as the best gift for Xmas. In China, rush air cargo shipments to the US deflated.
RasmussenReports.com (10/14): National unemployment in September 8.3%, same as last month.*
Gallup (10/10): “Record-High 62% say U.S. Government has too much power”
Gallup (10/2): “Trust in Media at New Low of 28% in U.S.” (8% for R’s, 51% for D’s, 27% for Indep’s)
Gallup (10/22): “Congress’ Job Rating Sinks to 15%; Trump’s Steady at 41%”
Given what everyone was expecting much higher inflation due to TACO’s tariffs, I would categorize 3% CPI & 3.8 annualized tame.
The question is does CPI level out or does it slowly keep climbing higher? I suspect CPI will keep climbing SLOWLY over the next 6 months and will force the Fed to suspend rate cuts once the FFR hits 3.5%.
The US economy has shown to be enormously resilient. I don’t see a slowdown in AI or datacenter expansion over the next 12-18 months, which will keep pushing the economy forward with above 3% GDP. Imports will continue to be lower than trend and again will pump up GDP.
Finally, if the FFR stays above 3%, this will help keep putting money in people’s pocket via savings. Back when the FFR was @ 5.25%, this equated to about $1T a quarter in extra money for people to spend.
Like everyone, I look forward to seeing the shutdown end & for the BLS to get back to work hopefully improving their data collection & analysis by early next year.
An innocuous comment gets 6 thumbs down.
Right. Everything I’m saying here is of course speculation, but it’s fairly middle of the road without looking for some sort of extreme outcome(s).
Thanks!
Inflation bs: apt vacancies turnover is the highest since 2020. The dumpster guys have the best year of their lives. The waiting list of new renters isn’t long enough. The maintenance guys are overwhelmed.
I pay less than $1,000 yearly in insurance and property taxes on an oceanfront condo.
Like Nomad Capital’s Andrew Henderson basically says:
1. Go where you’re treated best. Not just to another state where you’re treated ‘a little bit better’. Don’t be so narrow-minded. D.C. wants you to think you’ll never find a better deal elsewhere. The more you look around, the more realize that’s not true.
2. Andrew says some people call him a coward because he did not “stay and fight”. Did people who moved from Cali to Texas “stay and fight”? Did the Europeans who moved to America as colonists “stay and fight” the European oligarchs? Don’t “stay and fight” if your neighbors are mostly brainwashed, apathetic, ignorant, and/or too stupid to fight for the same causes you would fight for. (98% of voters re-elect the two main oligarch-funded political parties because “muh I don’t want to waste my vote!”. Since practically forever.) Remember the old saying that discretion is the better part of valor.
You are a smart person. I will be doing the same next year leaving the socialist parasites, bigots and boomers behind!
To where? Puerto Rico? LOL!
Thanks. Good luck on your migration too.
IMHO, not all socialists are alike. I live in a country people still call socialist. The private healthcare is dramatically cheaper AND BETTER than US. Without any fuss at all, they actually cured/healed something multiple doctors in the US refused to do. I’ve heard some amazing stories from locals of coverage here too by the national public system. Alas, the locals tell me the gov started reducing funding and encouraging private healthcare to the point they notice a deterioration in their public system. And now my private healthcare insurance rates skyrocketed so much I reduced coverage significantly just to keep the cost the same. Surprise, surprise, when the capitalist businesses face less or no competition from a public option, they raise their prices together and call it free enterprise. (Of course, services operated by private investors have to bake in a profit margin. Public services do not…though maybe they should be encouraged to “pretend enough to avoid waste”.)
It’s not that simple though, I know.
I see where it’s going and feel badly for the locals. I will probably move again. (Still better than USA. But I’m on a modest fixed income and thus watch my pennies.)
So, no wife? No kids? Please comment because single people with no allegiance or tie to their neighborhood state or country have more options, right?
Personally, I would rather stay and try to make where I come from a better place for me and those coming up after me, including my kids.
I’ve lived in Cali, Canada, Florida, and mostly Texas. IMO the relos from CA are overrated. Over half of personal income taxes is paid by California. They can’t s*** with that kind of cashflow.
And BTW, I loved Canada. Lose your job? Just walk right in that Dr’s office or hospital and hand them that same health card you’ve had for years. In fact, after moving back to the States my Canadian Health Cards was still good for years. If needed I could have gone there for free treatment. (Not saying that’s ethical, just saying I could have.) NOTHING changes and your good to go. And their citizens save7 to 9% on medical costs. People going without or having to wait? On something elective perhaps. I want to point out in Canada you can get indemnity US style health insurance. BUT NO ONE DOES. Not even millionaires I knew who easily could. And the meds are EXACTLY the same pharmco’s. Pure bunk that their meds are lessor. The pharmacos are JUST the same.
I went into a small podiatrist office. The Dr said he’d like some Xrays. The receptionist came and walked me back for them! Save some major money! Skip bimbos for routine stuff and you can begin to save some costs.
We moved from FL to TN five years ago before the SHTF in insurance and taxes. TN has a crazy right wing govt (no worse than FL) but their cultural BS doesn’t bother me we’re retired married 53 years and can ignore them.
What’s not to like? The peons are stuck where they are in penury and vanishing mobility. The non producing bloaters can inflate at will with immaterial goods exceeding real ones. The non participant dependent sector is growing but easy to maintain with unlimited deficit spending.
It’s an investor’s dream as AI ushers in the new, improved, high tech version of medieval feudalism!
Annual health insurance premium costs will surpass annual rental costs next year. What percent of PCE is health care, again? Housing is 32.9% and medical is 5%? LOL!
When people compare income tax rates of USA with other countries, they should incorporate medical costs into their comparisons. Among other things. Unfortunately, the overall process of “making truly fair comparisons” is tedious, since anything we find online was probably commissioned to market a POV.
I think you are confusing the CPI with the PCE
I got my PCE figures from a table found on this page:
https://en.wikipedia.org/wiki/Personal_consumption_expenditures_price_index
I mentioned PCE because CPI tracks “out of pocket” costs for premiums, meaning CPI aggressively hides subsidies. That said, both CPI and PCE have the ratio of rent to medical costs at about 6-to-1, when in fact the ratio is now about 1-to-1.
Home insurance is up from 150 in May 2022 to 165 in three years, or 5%/year, but that’s not all. A week from today, on Nov 1st, Obamacare insurance may rise sharply. SPX is up bc a 0.25 pts rate cut is built in. What if the Fed will not cut. What if Trump & Xi fight (if they meet). And what if AI capex reduces the mag 7 earnings.
Inflation has been stubbornly above target. The Fed lowered interest rates too much and too soon, and is now facilitating inflation.
From the street, inflation is a big problem. That is ground zero, higher up the food chain discussions can possibly be entertained as to how this might affect investments and wealth preservation.
So, why do insurance rates keep going up? Are the “inputs” into insurance rising in cost?
For the most part, I think they are rising because the value of the things being insured are rising. If there is more than that it is that the insurance companies are profiteering, somehow.
Obviously tariffs are raising the cost of everything. As are trade wars. Why were costs going down for so many things over the past 40 years (like computers, TV’s, appliances, etc)? Free trade, with certain areas (countries) being able to produce things cheaper than others (due to practically slave wages). So, if we continue on the path we are on, where so much of what we purchase is produced here in the US, without cheap migrant labor, we can be assured that life is going to get more expensive.
As far as housing, there is no “shortage” of homes, the issue is that with the low rates from 2020 through spring of 2022, buyers were able to “overpay” for homes, because they could afford the payments. Now with more normal rates, they cannot. Therefore price needs to come down.
Or people won’t seek jobs that require them to sell their homes.
Auto insurance is going up because cars are so expensive to repair. Body shops make about 15%, a repair that may have cost $1000 ten years ago might cost $10,000 now.
Replacement costs and labor keep rising
For those pining for the weekly Initial Unemployment Claims report that normally comes out on Thursday mornings, there is a substitute available using FRED.stlouisfed.gov
FRED collects the state-level weekly claims. The data series are just the state’s postal code (AL for Alabama, AK for Alaska and so on), followed by “ICLAIMS”.
So, initial weekly claims for, say, California, are the series CAICLAIMS.
You can add multiple series together (up to 15) and graph them as a single line.
Here’s a link for the weekly claims through 10/18 for the most populous 14 states, plus Washington DC:
https://fred.stlouisfed.org/graph/?g=1NpaX
There’s no obvious surge yet in weekly unemployment claims.
The google AI says these are the 14 most populous states: The 14 largest U.S. states by population are: California, Texas, Florida, New York, Pennsylvania, Illinois, Ohio, Georgia, North Carolina, Michigan, New Jersey, Virginia, Washington, and Arizona
Note that Virginia is included, so federal shutdown impacts should be included at least for that side of the Potomac. (Maryland is not in the top 14 states by population.)
Bonus: Continued Claims, same 14 states + DC:
https://fred.stlouisfed.org/graph/?g=1Npck
The FRED series names are in format [State][CCLAIMS], such as CACCLAIMS for California, or NYCCLAIMS for New York.
I have commented on this many times
You have to add 27+ week unemployed to Continued Claims
And that is not all you have to add. But that is all that is quantifiable
The market proves this permabear wrong once again.
I am not so sure you are wrong. Consider the measuring tool is the dollar and the dollar is anything but constant value. A better measure is to value items in gold as the value of the dollar over time is the inverse of gold. Dollar’s value is not represented by the dollar index. The dollar index is 100% made up of fiat currencies all in rapid value decline.
Measured in gold, S&P 500 has been declining since June 2022, down over 40%.
Of course not! These “inflation” estimates have been wrong vs. reality for several years. It is in the government’s best economic interests to understate the “numbers.” Ask any consumer what his or her actual inflation rate is these days.
Inflation at 3 percent and the SS COLA at 2.8 percent. How are retirees going to make that math work? And just wait till we hit real inflation in a few years when 80m socialists are demanding handouts in 2030.
“It’s Trump turtles all the way down and inflation all the way up!”
Got exit strategy?
COLA is up 2.8%. 2026 Medicare Advantage premium and part D deductions are $59. Part B was not announced.
$59? Well, you have a whole $3 extra/month to splurge then…..enjoy!
https://www.cnbc.com/2025/10/24/social-security-cola-2026-benefits-increase.html
Social Security retirement benefits will increase by about $56 per month on average starting in January, according to the agency.
Medicare Advantage is almost worthless with serious illness and a rip off of the govt.
Other sites reporting that OER is an outlier in this report. If the monthly OER change were within recent range, instead of the unusually low 0.13% that was reported, then overall CPI would be up even more. Specifically Core CPI would be up 0.07% more, and Core Services up 0.09% more than the reported month-over-month numbers.
P.S. Also noteworthy is lack of observed inflation in goods and most other “tariff-impacted” categories. 😉