Key Highlights
  • Inflation cooled in September, with headline CPI up 0.3% and core CPI up 0.2%, both slower than August. Transportation and apparel led gains, while shelter inflation eased slightly.
  • Existing home sales hit their strongest pace since February, rising 1.5% in September and up 4.1% year over year, supported by more inventory and lower mortgage rates.
  • Consumer sentiment declined again in October, with confidence slipping and long-term inflation expectations edging higher, while vehicle buying conditions remain historically weak.
Inflation: Decelerating in September
  • Headline inflation, as measured by the Consumer Price Index (CPI), decelerated in September to a weaker-than-expected rate, with the CPI rising by 0.3% compared to a 0.4% increase in August.
  • The core CPI, which excludes Food and Energy, also decelerated with an increase of 0.2%, which was down from 0.3% in August.
  • Transportation (0.9%), other goods and services (0.5%), and apparel (0.4%) saw the largest gains. Shelter saw an increase of 0.3%, which was a deceleration from 0.4%.
  • No major category saw declines, but medical care (0.1%) and education and communication (0.1%) saw the weakest gains.
  • Private transportation saw a 0.8% increase, but transportation details saw varied trends.
  • New-vehicle prices increased 0.2%, leased cars and trucks declined 0.6%, car rental increased 0.4%, and used cars decreased 0.3%.
  • Fuel increased 4.2%, parts increased 0.5%, maintenance and repair increased 0.3%, and insurance decreased 0.5%.
  • We observed wholesale used prices declining slightly in September on a seasonally adjusted basis, and used retail prices declined, while new retail vehicle prices increased.
  • On a year-over-year basis, core CPI decelerated to 3% from 3.1% while the overall CPI increased less than expected to 3% from 2.9% in August.
Existing Home Sales: Best Month Since February
  • Existing home sales increased 1.5% in September as expected.
  • The existing home sales SAAR of 4.06 million was up 4.1% from a year ago and was at the highest pace of sales since February.
  • Home sales trends varied by region, with an increase of 5.5% in the West but a 2.1% decline in the Midwest.
  • Compared to a year ago, sales were unchanged in the West but were up in the South (up 6.9%), the Northeast (up 4.3%) and the Midwest (up 2.2%).
  • Inventory increased 1.3% in September to 1.55 million units, which was up 14% year over year.
  • The months’ supply of homes for sale was steady at 4.6 months, which was up from 4.2 months a year ago but is still considered tight.
  • The median sales price declined to $415,200, representing a 2.1% increase compared to the previous year. While prices rose year-over-year across all regions, the increases were most modest in the West and the South.
Consumer Sentiment: Down Again in October
  • The consumer sentiment index from the University of Michigan decreased 2.7% in October to 53.6, which was lower than expected and marked a decrease from the earlier reading at the beginning of the month. The index was down 24% year over year.
  • The underlying views of current conditions and future expectations both declined similarly.
  • Expectations for inflation in one year decreased to 4.6% from 4.7%, but expectations for inflation in five years increased to 3.9% from 3.7%.
  • Consumers’ views of buying conditions for vehicles were steady with September’s level, which was the lowest level in four months.
  • Views of prices and rates were a little less negative than in September.
  • While we still have a week left in October, the daily index of consumer sentiment from Morning Consult has decreased 3% this month as of Oct. 24, leaving the index down 3.4% year over year.

Bottom Line

Inflation cooled in September, with both headline and core CPI showing slower growth than expected. This deceleration is a welcome sign, especially as we continue to monitor the evolving impact of tariffs. Categories like apparel and home furnishings – those most exposed to recent trade policy shifts – are beginning to show stronger price increases, while unaffected goods remain relatively stable. So far, the impact of tariffs on inflation is manageable.

Transportation costs rose, but the details reveal a mixed picture – new-vehicle prices edged up, while leased vehicles and insurance costs declined.

Meanwhile, the housing market is responding favorably to lower mortgage rates. We’re seeing more inventory come online and stronger sales activity, which could help moderate shelter inflation going forward.

Consumer sentiment has weakened in October, with confidence slipping and long-term inflation expectations edging higher.