CPI: -1% for October, +3.7% YOY, Deflation Trumping Inflation, Housing Starts Down 4.5%

The US Consumer Price Index, which measures inflation at the consumer level of the economy, was -1% in October and +3.7% year-over-year through October. Excluding volatile oil and food costs from the readings, “Core” CPI for October was -0.1% and +2.2% YOY through October. Here’s a link to complete CPI numbers for 3Q2008.

The yearly overall numbers that include oil and food clearly show the effect of dropping oil prices since summer, especially from August to September as oil prices really plummeted–this week oil is trading around $50/barrel. The core year-over-year number is just above the Fed’s target comfort inflation zone of 1-2%, and given the weakness of the consumer and businesses right now, it’s a tolerable level. In fact, the market has shifted to a mode of fearing deflation more than inflation now, and stocks are getting punished. See the right-menu of the site for a rundown of key US and global stock markets—quotes delayed 15-20 minutes.

HOUSING STARTS DOWN 4.5%
Housing starts were also released this morning and October showed a 4.5% drop. Markets are so concerned with other issues, this was merely one factor affecting negative market sentiment.

The good news in all of this is that bonds are rallying and this helps keep consumer rates low.