INFLATION WATCH heats back up for consumers and businesses in October

It was a big week for INFLATION WATCH, starting with the release of the Consumer Price Index from October.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent on a seasonally adjusted basis in October after rising 0.6 percent in September, the U.S. Bureau of Labor Statistics reported [Tuesday]....

The index for all items less food and energy rose 0.3 percent in October, as it did in September and August. Indexes that increased over the month include recreation, medical care, motor vehicle insurance, household furnishings and operations, and education. Conversely, the index for used cars and trucks and the index for communication were among the small number of major indexes that decreased in October.

Higher energy prices were a part of this increase in October, but it also included a resurgence of higher prices at the grocery store after a couple of months of near-zero inflation there.

The index for food rose 0.5 percent in October after being unchanged in September. The food at home index increased 0.4 percent over the month. Four of the six major grocery store food group indexes increased in October, while one index decreased. The index for other food at home increased 0.7 percent in October, as the index for snacks rose 1.0 percent. The meats, poultry, fish, and eggs index increased 0.5 percent over the month, as the beef index rose 0.9 percent. The index for fruits and vegetables and the index for dairy and related products each increased 0.6 percent in October.

That seems to reflect that higher producer prices and diesel shipping costs in September were making its way to store shelves (keep that concept in mind, because it'll come up again in a bit).

So what was the increase in year-over-year consumer inflation? The October report did not say, because of the US government shutdown that was going on during the previous October.

BLS did not collect survey data for October 2025 because of a lapse in appropriations. For most CPI series, BLS could not publish October 2025 indexes. As a result, BLS cannot publish 12-month percent changes for October 2026 for indexes where October 2025 data are unavailable.

Lucky break for the Trump folks on that one, eh? However, we still have a pretty good idea about the number, because if we look at the numbers since monthly CPI figures returned in December 2025, consumer prices are up somewhere between 3.9% and 4.0%.

The CPI report also leads to information on real wages for the month, to supplement what came out of last Friday’s jobs report. The 0.4% increase in consumer prices in October was the same as the 0.4% increase in average hourly wages for last month, meaning that October was the 7th of the last 9 months that average hourly wages did not increase.

None of this is good for consumer spending prospects as we head into the Holiday shopping season, and it doesn't seem like it'll change any time soon, as producer prices also kept rising last month.

US wholesale prices surged to a four-year high in October as broad, sticky inflation across manufacturing and supply chains reinforced expectations that the Federal Reserve will hike interest rates by 25 basis points next month.

The Producer Price Index for final demand, which measures the prices that factories, farmers, and producers charge for their finished goods and services, rose 6.5% last month, the largest increase since the aftermath of the pandemic when prices jumped 7.4% in 2022. Expectations were for the wholesale price index to rise 6.6%.

On a core basis, excluding food, energy, and trade services, PPI rose 4.9% in October, compared with 5% in September, indicating that wholesale cost pressures persisted beyond the energy sector into other segments of the economy….

Over 60% of the total price increase for physical goods came from everyday manufactured products, rather than from volatile categories like food or energy, though food prices jumped 1.3%. Energy prices dipped slightly by 0.1%, but still remained elevated.

It’s that last part about "everyday manufactured products" that’s alarming, and when I look at the official PPI report, I see sizable October increases in electronics, iron and steel scrap, and industrial chemicals, auto parts and trailers, and trucks transporting freight. Those are big inputs and costs that will find their way into the sticker price consumers are going to pay in the future.

In addition to the increases in PPI at the end point, prices jumped in the step before the end point, which also portends higher prices for November and likely December.

Prices for processed goods for intermediate demand advanced 0.4 percent in October, the third consecutive rise. Leading the October increase, the index for processed materials less foods and energy moved up 0.9 percent. Prices for processed foods and feeds advanced 1.0 percent. In contrast, the index for processed energy goods declined 1.6 percent. For the 12 months ended in October, prices for processed goods for intermediate demand increased 14.6 percent, the largest 12-month rise since jumping 17.2 percent in July 2022.

The bond markets have reacted to these inflation numbers by reversing much of the decline in interest rates that happened throughout October. The yield on the benchmark 10-year Treasury note gained nearly 30 basis points this week, and now is back at 5.15%.

I read all this, and I don't see higher inflation rates ending just because gas prices are making their seasonally-influenced retreat from October's high levels. There’s too much price pressure in the pipeline for products that’ll cost Americans more in the next few months. If wage increases continue to fall short of inflation and interest rates stay high, I don't see consumers being much happier for the rest of this year, even if pump prices have a 3 instead of a 4 as the first digit.