NEW YORK (Reuters) - Consumer prices outside food and energy rose less than expected in September to post their smallest gain in six months, a government report showed on Wednesday, suggesting inflation pressures remained contained.
U.S. housing starts surged in September at their fastest annual pace in 17 months on a big increase in groundbreaking for multi-family units, while permits for future construction fell, a government report showed on Wednesday.
DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
”Overall CPI rose by 0.3036% before rounding, with yr/yr growth continuing to accelerate, to 3.9% from 3.8%. The main source of strength was energy, up by 2.0%, led by a 2.9% rise in gasoline that fell by 0.7% before seasonal adjustment. Gasoline prices rose in early September but fell late in the month, suggesting a softer contribution from gasoline can be expected in October. Gains in energy were not confined to gasoline, with fuels and utilities up by 0.7%, while food with a 0.4% increase continues to outperform the core, with recent weather conditions probably a factor here.
“With overall CPI continuing to accelerate it is too early to sound the all clear on inflation but energy should be softer in October and doves can take comfort in a subdued core rate. One month does not make a trend and the soft September core rate follows a rise of 0.2444% in August before rounding. However the 3 month annualized core rate of 2.1% in September is down from 2.9% in June, which is consistent with a recent acceleration in core CPI having passed its peak.”
FRED DICKSON, CHIEF MARKET STRATEGIST, D.A. DAVIDSON & CO. LAKE OSWEGO, OREGON
“The headline data, it appeared to be pretty much on target. Our response is that we are seeing inflation pressure slowly build up in the economy. While the core rate was only up 0.1 percent, it still has pushed the core level up to 2 percent which is at the top end of the Fed’s targeted zone for no action. So the economy has basically strengthened to the point where we are seeing companies pass along inflation increases and at some point the Fed has to take notice of what is happening in terms of inflation.”
“The housing data is a tough indicator because there was a pleasant surprise. It appeared the number may have jumped up, most likely as a result of weather that could have dampened the housing data in the prior month. The way I’d put it, the housing data combined with CPI data shows that the economy, while it still is muddling along, is showing a little forward momentum that has not generally been anticipated by most analysts.”
“The housing starts were strong, which is the first sign of life in housing we’ve seen in a while. That’s welcome. And the CPI is positive for risk, which is helping the euro. But generally, I think this will have very little impact on trade because the focus is still squarely on Europe. The market is coming to the conclusion that they are working on something big and dramatic and the euro is trading accordingly.”
RICH ILCZYSZYN, SENIOR MARKET STRATEGIST WITH MF GLOBAL IN CHICAGO
”We’re still in shock from Apple missing yesterday, but the market recovered somewhat overnight. The CPI numbers are a bit flat, but the market is responding OK. Right now, these numbers are important but are overshadowed by the magnitude of the euro zone issue and the size of the Greek protest.
“The housing market remains relatively slow, so bad news, since it isn’t worse news, can almost seem like good news.”