Energy, transportation and gasoline prices are all significantly down.

By Manuel Gutierrez, Consulting Economist to NKBA

The Consumer Price Index (CPI) remained at modest levels, with October figures virtually the same as for September. The “core” CPI, which removes volatile items such as food and energy from the index calculation, rose a mere 0.1%.

Compared with last year, the overall CPI was 1.2% higher than in October 2019. However, as the chart below indicates, October prices were lower than the rate in the previous two months. The core CPI is 1.6% above last year, but also reflects  general moderation in consumer prices — which should come as welcome news to consumers.

This doesn’t tell the whole story, however. To conclude that prices did not change in October because the overall CPI doesn’t indicate a change is misleading, since the CPI is a composite of prices from several thousand items that consumers may purchase, and those prices will increase or decrease differently from month-to-month.

To illustrate, the chart below includes a select number of categories with a wide range in the change in prices over the last 12 months.

At the high end, prices of Major Appliances this year were 14% above their year-ago levels. This likely reflects strong demand for these items, as the stay-at-home orders prevalent throughout many areas have led consumers to engage in more remodeling and purchasing of home items. In fact, retail sales at appliance stores were up over 7% for the 12 months ended in August, compared to just a 2% increase across all sales.

At the other extreme, as seen at the bottom of the chart, prices for Energy products purchased by consumers are 9% lower than a year ago, while Transportation Services are off by 5%. Again, in both cases the cause of the price decline is the pandemic shutdown, which greatly reduced the amount of travel and driving by consumers. Additionally, prices paid for Gasoline are down 18% from 2019.

Turning to products that consumers purchase for ongoing home maintenance or improvement, price change exceeds overall inflation. The index for all Housing products combined showed an increase of  26% for the last decade, exceeding overall inflation by six percentage points.

At the same time, the price for several products closer to our industry — like those used in the kitchen or bathroom — lag overall price inflation significantly. In fact, as illustrated in the chart below, prices paid by consumers for three of these product categories, Appliances, Windows and Flooring, are lower today than they were 10 years ago.