US' core inflation strength returns

US core services prices returned to their trend of recent month, rising a solid 0.3% m/m. Shelter, including rent and OER, supported the strength in core services. Other categories such as medical care and transportation services increased as well, suggesting the strength in core services inflation was broadly based. 

Core goods prices were flat on the month, against the expectations of a small decline. Major categories such as apparel, new and used vehicles, medical commodities and tobacco all made negative contributions to core goods inflation. 

"Offsetting these were rises in the prices of household furnishings, other household equipment, and education. The former group of goods is seen as being more influenced by imported price pressures, and their continued decline during September suggests that falling import prices and dollar strength continue to be passed through to consumer goods", says Barclays.

After a weak core services reading in August, this month there is a return to the long-standing dynamics for US inflation. Core services, which have typically been the main engine of inflation, remained strong and more than offset the softness in core goods.