October Inflation Report to Outline Latest Price Trends

So-called core CPI, which excludes volatile energy and food prices, rose 6.6% in the year through September—the biggest increase since 1982. That marked an acceleration from 6.3% in August and 5.9% in both June and July.

The CPI measures what consumers pay for goods and services. The Labor Department is scheduled to release its October report at 8:30 a.m. Eastern time on Thursday. 

Economists surveyed by The Wall Street Journal estimated that the CPI rose 7.9% in October from a year earlier, while the core-CPI increased 6.5%.

Inflation surged last year as the U.S. economy rebounded from the Covid-19 pandemic. Prices jumped as strong consumer spending—fueled by very low interest rates and government stimulus—collided with jammed supply chains and pandemic-related shortages. Russia’s war with Ukraine this year further stoked inflation worldwide, driving up prices for food, energy and other commodities. 

Price pressures have remained stubbornly high in large part because they have spread increasingly from goods to more labor-intensive services—such as shelter, medical care and car insurance—where inflationary momentum tends to be slow to reverse once it gets going. 

“Early on, goods prices that were driving that increase but more recently it’s services prices, and that likely reflects the very tight labor market,” said

Brett Ryan,

senior economist at Deutsche Bank. 

Unemployment remained low in October, with robust payroll growth and accelerating wage gains adding to household incomes.

“A strong labor market and strong job growth supports strong demand, which allows inflationary pressures to stay elevated,” said Blerina Uruci, U.S. economist at T. Rowe Price. “You’ve got more demand chasing goods and services, the supply of which is being impaired at the moment for a number of reasons.”

The Federal Reserve is aggressively lifting interest rates to combat inflation, hoping they will curb hiring, spending and investment. 

Officials last week raised their benchmark federal-funds rate by 0.75 percentage point—their sixth increase this year—bringing it to a range between 3.75% and 4%. Fed Chairman

Jerome Powell

signaled that they would keep increasing rates, possibly in smaller increments but to higher levels than previously expected, increasing the risk of a recession.

Soaring mortgage rates have taken a heavy toll on the housing market. Home sales fell for the eight months through September and price gains slowed.

Housing costs, nonetheless, are a strong source of inflationary pressure. They make up two-fifths of core-CPI inflation and tend to move slowly, since they are based on leases that are typically negotiated just once a year, and not on home sales prices. 

“Because market rent increased so dramatically, landlords have been more likely to push really hard for increases. They’re OK allowing one or two months of vacancies because it’s still more profitable,” said

Tiffany Wilding,

North American economist with bond fund Pimco. That together with high mortgage rates making homes harder to buy “mean we’ve really seen rents take off, and it takes time to come back down.” 

Ms. Wilding doesn’t expect annual housing-cost inflation, as measured in the CPI, to peak until next spring, even though some private-sector gauges now show rents falling monthly. 

Gasoline prices ticked up in October, and the national average price of regular gasoline was $3.81 a gallon on Wednesday, according to AAA/OPIS. Prices declined to $3.67 a gallon in September, after peaking in mid-June at $5.02 a gallon. 

“It doesn’t look as challenging as it was in the second quarter of this year, but energy remains a wild card when it comes to inflation,” said Ms. Uruci.

Prices for gasoline and food tend to be important in shaping people’s expectations for future inflation, which can become self-fulfilling, she said. 

Consumer spending, the economy’s main engine, grew more slowly in the third quarter than in the second, after adjusting for inflation and seasonality.

Peter Stieglmayr, a psychotherapist in New York City, said he has seen patients pull back on therapy because inflation has eaten into their earnings. 

Demand for his services leapt during the first two years of the pandemic, driven by the stress of Covid-19 as well as by abundant government support that enabled clients without insurance to afford his $250-an-hour fee. But that support has long since dried up. And in the past few months, he has seen clients who pay out of pocket reduce the frequency of appointments or stop coming altogether. 

“I’m finding individuals are starting to look at their budgets and say, ‘I may need to cut back on this because food is so expensive, or they’re raising my rent.’” 

The drop in demand has pushed him to take more clients with insurance, even though the reimbursement rates can be less than one-third of his rate. “It’s hit everybody’s bottom line who’s in similar circumstances.”

Some companies are growing less sure of their pricing power as the economic outlook darkens. Half of small businesses raised prices in October, on net, the lowest share since September 2021, according to a survey conducted by the National Federation of Independent Business, a trade association. However, the share saying they expect to raise prices in the next three months ticked up slightly in October from September. 

Write to Gwynn Guilford at [email protected]

So-called core CPI, which excludes volatile energy and food prices, rose 6.6% in the year through September—the biggest increase since 1982. That marked an acceleration from 6.3% in August and 5.9% in both June and July.

The CPI measures what consumers pay for goods and services. The Labor Department is scheduled to release its October report at 8:30 a.m. Eastern time on Thursday. 

Economists surveyed by The Wall Street Journal estimated that the CPI rose 7.9% in October from a year earlier, while the core-CPI increased 6.5%.

Inflation surged last year as the U.S. economy rebounded from the Covid-19 pandemic. Prices jumped as strong consumer spending—fueled by very low interest rates and government stimulus—collided with jammed supply chains and pandemic-related shortages. Russia’s war with Ukraine this year further stoked inflation worldwide, driving up prices for food, energy and other commodities. 

Price pressures have remained stubbornly high in large part because they have spread increasingly from goods to more labor-intensive services—such as shelter, medical care and car insurance—where inflationary momentum tends to be slow to reverse once it gets going. 

“Early on, goods prices that were driving that increase but more recently it’s services prices, and that likely reflects the very tight labor market,” said

Brett Ryan,

senior economist at Deutsche Bank. 

Unemployment remained low in October, with robust payroll growth and accelerating wage gains adding to household incomes.

“A strong labor market and strong job growth supports strong demand, which allows inflationary pressures to stay elevated,” said Blerina Uruci, U.S. economist at T. Rowe Price. “You’ve got more demand chasing goods and services, the supply of which is being impaired at the moment for a number of reasons.”

The Federal Reserve is aggressively lifting interest rates to combat inflation, hoping they will curb hiring, spending and investment. 

Officials last week raised their benchmark federal-funds rate by 0.75 percentage point—their sixth increase this year—bringing it to a range between 3.75% and 4%. Fed Chairman

Jerome Powell

signaled that they would keep increasing rates, possibly in smaller increments but to higher levels than previously expected, increasing the risk of a recession.

Soaring mortgage rates have taken a heavy toll on the housing market. Home sales fell for the eight months through September and price gains slowed.

Housing costs, nonetheless, are a strong source of inflationary pressure. They make up two-fifths of core-CPI inflation and tend to move slowly, since they are based on leases that are typically negotiated just once a year, and not on home sales prices. 

“Because market rent increased so dramatically, landlords have been more likely to push really hard for increases. They’re OK allowing one or two months of vacancies because it’s still more profitable,” said

Tiffany Wilding,

North American economist with bond fund Pimco. That together with high mortgage rates making homes harder to buy “mean we’ve really seen rents take off, and it takes time to come back down.” 

Ms. Wilding doesn’t expect annual housing-cost inflation, as measured in the CPI, to peak until next spring, even though some private-sector gauges now show rents falling monthly. 

Gasoline prices ticked up in October, and the national average price of regular gasoline was $3.81 a gallon on Wednesday, according to AAA/OPIS. Prices declined to $3.67 a gallon in September, after peaking in mid-June at $5.02 a gallon. 

“It doesn’t look as challenging as it was in the second quarter of this year, but energy remains a wild card when it comes to inflation,” said Ms. Uruci.

Prices for gasoline and food tend to be important in shaping people’s expectations for future inflation, which can become self-fulfilling, she said. 

Consumer spending, the economy’s main engine, grew more slowly in the third quarter than in the second, after adjusting for inflation and seasonality.

Peter Stieglmayr, a psychotherapist in New York City, said he has seen patients pull back on therapy because inflation has eaten into their earnings. 

Demand for his services leapt during the first two years of the pandemic, driven by the stress of Covid-19 as well as by abundant government support that enabled clients without insurance to afford his $250-an-hour fee. But that support has long since dried up. And in the past few months, he has seen clients who pay out of pocket reduce the frequency of appointments or stop coming altogether. 

“I’m finding individuals are starting to look at their budgets and say, ‘I may need to cut back on this because food is so expensive, or they’re raising my rent.’” 

The drop in demand has pushed him to take more clients with insurance, even though the reimbursement rates can be less than one-third of his rate. “It’s hit everybody’s bottom line who’s in similar circumstances.”

Some companies are growing less sure of their pricing power as the economic outlook darkens. Half of small businesses raised prices in October, on net, the lowest share since September 2021, according to a survey conducted by the National Federation of Independent Business, a trade association. However, the share saying they expect to raise prices in the next three months ticked up slightly in October from September. 

Write to Gwynn Guilford at [email protected]