US CPI inflation continues to rise, core stabilizes

In September, US CPI inflation rose from 3.8% Y/Y to 3.9% Y/Y, reaching a new cyclical high, which was in line with expectations. On a monthly basis, CPI rose by 0.3% M/M led by higher prices for gasoline (2.9% M/M), airline fares (1.0% M/M), tobacco (0.7% M/M) and housing fuels/utilities (0.7% M/M). Also food prices continued to rise, by 0.4% M/M in September. Price increases were partly offset by lower prices for apparel (-1.1% M/M), used motor vehicles (-0.2% M/M) and recreation (-0.1% M/M). Core CPI, which excludes food and energy, increased only slightly, by 0.1% M/M, while the annual level stabilized at 2.0% Y/Y. The consensus was looking for an increase to 2.1% Y/Y. In its latest FOMC statement, the Fed said inflation appears to have moderated, but this is not (yet) reflected in the CPI data. Headline CPI inflation continues to rise and is approaching the 4% level, while core inflation stabilized at 2%. As oil and commodity prices picked up late in September and in October a further increase is not excluded in the coming months.

US housing starts picked up more than expected in September, after falling by 7% M/M in August. In September, housing starts rebounded by 15% M/M to a total level of 658 000, the highest level in 1.5 year, while a more moderate increase (to 590 000 was forecast). The details show an impressive increase in multi-family starts (51.3% M/M), while single family starts rose only slightly (1.7% M/M). Strength was widespread across regions. Building permits, on the contrary dropped more than expected. On a monthly basis, building permits fell by 5.0% M/M to a level of 594 000, while a decline to 610 000 was forecast. Weakness in permits was led by the more volatile multi-family component (-14.5% M/M), while single-family permits dropped only marginally (-0.2% M/M). Both housing under construction (0.7% M/M) and housing completed (2.1% M/M) rose in September due to strength in multi-family ones. The rebound in housing starts was partly due to weather related factors, which depressed housing starts in August. Nevertheless, the NAHB housing market index showed also some signs of life. These are only some bright spots and it is too early to become optimistic about the US housing market, as credit conditions remain tight and unemployment is still very high. But if we see more positive housing data in the coming months, it might be an indication that something is changing.