Consumer Prices Rise More Than Expected as Shelter and Food Prices Jump

The consumer price index rose 0.4 percent in October compared with September, the Labor Department said Tuesday.

Core prices, a measure that excludes food and energy prices, rose 0.3 percent.

Economists had forecast overall inflation at 0.3 percent. Core prices were expected to rise 0.2 percent.

The September increase was estimated at 0.6 percent for overall inflation and 0.3 percent for core inflation.

There was no estimate for year-over-year prices released due to the government shutdown last October. This prevented the government from collecting and releasing the CPI 12 months ago.

The three-month annualized rate of headline inflation comes to 5.7 percent and three-month core CPI is up 3.7 percent. Six-month annualized CPI is up 3.2 percent and core is up 2.8 percent. This indicates a sustained and significant acceleration of inflation.

Shelter prices rose 0.3 percent in October, which the Department of Labor said accounted for over thirty percent of the monthly all items increase. Food prices rose 0.5 percent in October, as the food at home index—which covers grocery prices—rose 0.4 percent and the food away from home index—basically, restaurant prices—increased 0.5 percent.

The index for energy increased 0.7 percent over the month following a 5.2-percent increase in September, including a one percent increase in the price of gasoline.

The higher-than-expected rate of inflation boosted bets in the derivatives market that the Federal Reserve will increase interest rates when it meets next month. Investors increasingly expect the Fed may raise interest rates by a half percentage point, a bigger increase than the quarter-point increase expected earlier.

The report indicates inflationary pressures are spreading out from oil prices and closely related goods and services. Household furnishing prices rose 0.7 percent. Major appliance prices jumped 1.4 percent. Medical drug prices, which have been falling in recent months, rose by 0.4 percent. High-tech goods rose 0.4 percent.

Prices of many services rose sharply. The overall category of services excluding energy services rose 0.3 percent. Recreation services prices jumped 0.8 percent, as did hospital services. Hotel and motel prices rose 0.6 percent. Motor vehicle insurance prices rose 0.7 percent. Physician services rose 0.4 percent. Airline fares rose 0.4 percent.

So-called super core services inflation—which excludes energy and housing prices—rose by 0.5 percent.