US CPI jumps 1.2 percent in September

Plenty of US economic data yesterday. Reuters provides a summary of the news, including inflation:

U.S. consumer prices soared 1.2 percent last month, the biggest gain in more than 25 years, as hurricanes led to a record surge in energy prices... The increase in the consumer price index was the largest since March 1980, the Labor Department said. But outside of food and energy, prices were tame -- rising a scant 0.1 percent for the fifth straight month and offering hope that broad-based inflation could be averted. The steep energy price rise has pushed overall prices up 4.7 percent over the past year, the biggest jump since 1991.

...retail sales:

A separate government report showed U.S. retail sales rose a lower-than-forecast 0.2 percent last month as car sales tumbled. Outside of autos, however, sales climbed a healthy 1.1 percent, partly reflecting the big gain in gasoline prices... sales outside of the volatile auto and gasoline sectors notched a healthy 0.6 percent advance.

...industrial production:

[A] report from the Federal Reserve...showed industrial production plummeted 1.3 percent last month, the biggest drop since January 1982.

...and consumer sentiment:

The University of Michigan's preliminary index of consumer sentiment fell unexpectedly in early October to its lowest level in 13 years, extending a September decline, according to sources who saw the subscriber-only report.

David Altig provides an interesting analysis of the inflation data.

[T]he trend in the headline CPI is moving up, the trend in the CPI ex food and energy is moving down, and the median is hanging in right where it has been most of the year.

And, quoting Mike Bryan at the Cleveland Fed:

[W]e have a very "tail heavy" distribution of price adjustments--prices are showing either troubling increases, or softness, but very few are in the middle, moderate range.

While energy was the chief culprit in pushing up headline CPI, apparel helped hold it down. The BLS website shows that apparel fell 0.1 percent over the previous month and 0.6 percent over the previous year. News that the textile trade talks between the US and China have failed might have a bearing on this reading in the months ahead.

But China's input is more than just in textiles. Morgan Stanely's Andy Xie warns that China's deflationary impact may be abating, albeit temporarily.

China is not deflationary for the global economy at present, I believe. It could be an inflationary factor for one or two years due to cyclical and political reasons. Over time, China may become deflationary again when it moves up the value chain to re-price higher value-added products with Chinese costs. What matters to the market now is that China’s impact on global economy is becoming inflationary

The deflation winners, mainly big-box retailers, could see their gains reversed in the next year or two. Also, the major central banks may have to tighten into a slowing global economy, as the China factor no longer holds inflation back.

But if he is right, the impact has not appeared in the import price data yet. While overall import prices rose 2.3 percent in September, no thanks to energy imports, prices of goods imported from China fell 0.2 percent in the month, and 1.2 percent over the previous year.