Consumer prices rise again in October

The Labor Department reported a seasonally adjusted 0.3 percent increase in the Consumer Price Index for the month of October, matching the September increase, due largely to higher energy prices.

The year-over-year rate of inflation climbed to 3.5 percent, a level not seen since August of last year, just prior to the sell-off in energy commodities that led to plunging year-over-year changes in the CPI as shown below.

Energy prices rose 1.4 percent in October and now post a 14.5 percent increase from year ago levels. Energy commodities have risen 22.5 percent over the last twelve months.

Medical care costs rose 0.6 percent last month, up 4.8 percent year-over-year, and the price of food rose 0.3 percent in October, up 4.4 percent from a year ago.

Housing, which contributes 43 percent to the overall CPI rose just 0.2 percent, up 3.1 percent year-over-year, as rent increased 0.5 percent and owners' equivalent rent rose 0.2 percent. Rent and owners' equivalent rent account for 6 percent and 24 percent of the CPI, respectively.

As mentioned here before, part of the reason why the year-over-year inflation rate has been moving higher in recent months is a result of negative numbers rolling out of the 12-month calculation as shown below.

Next month's report, after the full impact of higher energy costs show up at the consumer level and with distortions due to seasonal adjustments that assume much lower fuel prices at this time of year - these factors could push the annual inflation rate over four percent.

While this level of inflation may bear little resemblance to the real world, where, for example, senior citizens experience price increases at a much higher rate due to the mix of items they purchase (e.g., heating oil and medical care versus i-Pods and the latest teen fashions), this is still high by Labor Department standards.