October witnessed a greater-than-anticipated drop in inflation, with significant declines in both the Consumer Price Index (CPI) and Producer Price Index (PPI). The CPI index declined from a 3.7% annual rate in September to a 3.2% in October, missing the expected 3.3% forecasted by economists.
The PPI index was 1.3% higher compared to a year ago, tumbling from a 2.2% annual rate in September and well below the expected 1.9%. On a monthly basis, the PPI index recorded a deflation, falling 0.5%.
According to Bill Adams, chief economist for Comerica Bank, "the inflation fever" has broken in the U.S.
Energy Prices Tumble, Gasoline Costs Collapse
Among consumer prices, energy costs experienced a 4.5% decrease, a significant shift from the slight 0.5% reduction in September. Leading this decline were notable drops in gasoline prices (5.3%), utility gas services (a steep 15.8% fall), and fuel oil (with a 21.4% decrease).
From a producer's perspective, the October reduction in prices for final demand goods was largely influenced by gasoline prices, which declined by 15.3% for the month. This contributed to over 80% of the overall decrease. In total, the energy item saw a 6.5% reduction in prices on a month-to-month basis.
Despite the declining trend in energy prices, energy stocks actually moved higher over the past two sessions, with the Energy Select Sector SPDR Fund
"Producer prices slowed more than expected in October, mostly due to a big drop in energy prices," Bill Adams said.
Eggs Bubble Pops
Eggs faced a notable monthly plunge of 12.9% among PPI items. Yearly, wholesale egg costs have plummeted by 55.6%, marking the sharpest annual descent in the PPI.
In contrast, on the consumer side, egg prices remained relatively stable month-on-month but are down 22% from October 2022, representing the second-largest year-on-year drop in the CPI basket.
Don't Mix Apples With Oranges
Apple prices in the CPI basket witnessed the largest monthly fall, dropping 7.9%. On an annual basis, they were 3.9% lower.
Conversely, orange juice prices jumped 3.1% from September 2023, marking the second-largest monthly increase among CPI items.
The market-regulated price, as tracked in Intercontinental Exchange Inc.'s frozen concentrated orange juice futures, is up 96% year to date and 100% from a year ago, more than doubling the performance of the Nasdaq 100.
A Costlier Thanksgiving For Consumers, Cheaper For Producers
For U.S. consumers, the price of "uncooked poultry including turkey" rose by 1.2% monthly and 7.2% annually, signaling a costlier Thanksgiving this year.
However, producers are seeing a different picture. Slaughter turkeys prices plummeted by 13.8% month-on-month and 38.6% year-on-year, with processed turkey production costs decreasing by 3.4% monthly and 39.5% annually.
Service Sector: Sport Tickets and Motor Insurance on the Rise, Health Insurance Tumbles
In the services sector of the CPI, admission to sporting events recorded a 3.6% month-over-month increase - the highest in the overall basket - and is now 25.1% higher than last year.
Motor vehicle insurance costs also surged, up 1.9% monthly and 19.2% annually.
Health insurance costs grew by 1.1% monthly but remained 34% lower than the previous year, marking the largest annual decline among CPI items.
