Inflation's Unexpected Dip: 5 Intriguing Price Shifts, A Thanksgiving Cost Conundrum And More

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 XLE rising 2% on the week.

“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.

Chart: Orange Juice Futures Have Skyrocketed 100% Over The Past Year

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.

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