US CPI declines as energy drag continues

US CPI declined for the second month running in September. Energy prices were the only drag on headline CPI, while core and food prices made positive contributions. Headline CPI fell 0.2% m/m in seasonally adjusted terms. 

Core CPI was slightly stronger than expected at +0.2% m/m. The NSA CPI index came in at 237.945, higher than expectations. Energy prices declined 4.7% m/m, while food prices rose 0.4% m/m. On a y/y basis, total CPI was flat and core CPI rose 1.9%. 

Following the decline in wholesale energy prices in recent months, gasoline and other energy prices were a drag on headline CPI. However, their effect is expected to be transitory and headline CPI to start increasing on a m/m basis at the end of this year. 

"The view that the underlying trend in consumer prices remains benign, especially for services inflation, although a strong upward trend is not expected to emerge in the near term", opines Barclays. 

In particular, core goods prices are expected to remain a drag, driven by the renewed decline in commodity prices and the recent surge in the value of the dollar.