October Consumer Price Index Report: What Should We Expect?

Key Takeaways

• Inflation has been trending up in recent months, which means all eyes will be on the October CPI report when it’s released next week
• The annualized rate of CPI came in at 3.7% in September, up from 3.2% in August and 3.0% in June
• Higher inflation combined with unfavorable economic data such as unemployment and the Producer Price Index, could mean the Fed will look to raise rates again

Inflation continues to be watched more closely than Taylor Swift at a Kansas City Chiefs game. Well, maybe not quite, but in the realms of economic data its probably not too far off.

The reasons for this are pretty obvious. Cost of living went nuts last year, causing the Fed to hike rates faster than we’ve seen in decades. Now that inflation has started to cool off we’ve seen them take their foot off the gas a little, but there have been some signs that prices are starting to tick up again.

That’s not what anyone wants. Both businesses and consumers alike have been feeling the pinch of higher rates, from everything from mortgage costs to car loans to credit cards. Which is why there’s a lot of focus on the Consumer Price Index figure for September, which is due to be released next week.

So what should we expect, and what does it mean for investors?

How the figures from August shaped up

One of the reasons the figures are going to be watched so closely this month, is because the numbers for August gave a little cause for concern. The monthly price rise came in at 0.6%, which was the biggest monthly gain we’ve seen so far in 2023.

It took the headline annualized rate to 3.7%, up from 3.2% in July and 3.0% in June.

So while the figures are still far below where they were at their peak in 2022, the trend isn’t what the Fed (or consumers) want it to be.

Expectations for October CPI report

Right now we’re not yet seeing any consensus forecast for October’s figures, which are due out next week. We’re not expecting any major movements up or down, so it’s going to be the trend that analysts will be looking for.

Should inflation tick up above the 3.7% annualized rate from September’s report, markets are likely to react negatively. Not just because of the data showing rising prices, but also because the expectation off the back of that will be for the Fed to raise rates again.

Between now and the release of the CPI report on October 12th, we’ve got other data which will also feed into the Fed’s decision.

• ADP private payroll employment report
• US jobs report
• US unemployment rate
• Producer Price Index

The bottom line

The Feds battle against inflation isn’t over yet, which means we haven’t necessarily seen the end of rising interest rates. That’s important for investors, because there’s only so many efficiency gains that companies can make before higher rates begin to stifle growth.

That means potentially impacting revenue, profits and stock prices.

Watching the economic data as it unfolds can help give investors a sneak preview as to what the Fed might do, and by extension, how markets might react.