Missed it by that much…
With PPI set for Friday release, the CPI numbers came in above expectations with Food going the wrong way while Energy was doing better sequentially. It will take time for lower oil to translate into friendlier downstream price trends (Trump willing on the Iran front).
In the end, there is no fighting the lag effects of energy, tariffs, high materials costs, and broader pricing power in a solid economy with constructive PCE growth and a capex boom.
With no October 2025 numbers as a result of the record government shutdown of Oct/early Nov 2025, this month’s CPI exercise is a MoM line-by-line drill. We look at some of the major line items below with a focus on Food, Energy and Medical.
The sequential MoM trends are useful since they tell you whether the overall trend is still working against lower inflation. The answer is that the metrics are better than they were but still not making much progress relative to what the FOMC might need to do.
The immediate reaction was 2Y higher (+21 bps as we go to print) and 10Y (+15 bps) with CPI still running slightly hotter than expected.
A few highlights:
All items: The MoM came in at +0.4, down from +0.6 in Sept and flat to August’s +0.4.
All items less Food: MoM came in at +0.3 vs. +0.7 in Sept and +0.4 in August. This metric is from Table 3 (Special Aggregate Indexes).
All items less Shelter: This is also from Table 3. Oct at +0.4 is down from +0.8 in Sept and +0.5 in August.
All Services: Also from Table 3 Special Aggregates. +0.4 in Oct is flat to +0.4 in Sept but above +0.3 in Aug.
Core (ex-Food/Energy): MoM at +0.3 vs. +0.2 expected. Flat to Sept +0.3 and August +0.3.
Food: This line was a problem. The +0.5 in Oct was up from +0.0 in Sept and +0.1 in Aug. Oct was the highest since April.
Food at Home: The +0.4 MoM was up from -0.1 in Sept, 0.0 in August, and -0.1 in July. Oct was the highest since April.
Food away from home: The +0.5 was up from +0.2 in Sept and +0.3 in Aug and the highest in 2026.
Meats: This is near and dear to many with Oct at +0.6 vs. -0.9 in Sept and -0.2 in August. “Beef and Veal” was +0.9 in Oct vs. -1.0 in Sept and -1.0 in Aug. Pork and Poultry were also both higher.
Energy headline: The broad energy MoM is +0.7, down sharply from +5.2 in Sept. and +2.1 in August.
Gasoline: The MoM of +1.0 is down from +9.1 in Sept and +3.9 in August.
Fuel Oil: The +2.0 in Oct comes after +15.3 in Sept and +10.1 in August.
Electricity: The +0.9 is markedly higher than +0.2 in Sept and -0.2 in August. The +0.9 is the highest since April’s +2.1.
Medical Care Services: The Medical Care Services line at +0.3 is steady but warm at +0.3 in Oct after +0.3 in Sept but -0.2 in Aug.
Physicians’ services: This one is a bit hotter at +0.4 in Oct, up from 0.0 in both Sept and Aug.
Hospital services: Oct at +0.8 was up from +0.7 in Sept and 0.0 in Aug.
Medical care commodities (mostly drugs): Oct posted +0.5, up from -0.7 in Sept and -0.2 in Aug.
Appliances: Oct posted +1.3, up from -0.7 in Sept while the “Major Appliances” category was +1.4 in Oct vs. 0.0 in Sept.
The lag effects keep on coming…
There is no shortage of line items in the CPI report and we get PPI on Friday. The coming months will be about continuing to watch for the lag effects of rising energy and materials costs and how those pressures along with tariffs flow downstream across services and manufactures and into consumers and small businesses. The PPI trends have been ugly to date with materials (including metals and commodities) and energy more broadly serving as major factors.
The biggest enemy for the consumer (and for Trump’s credibility on tariffs) is that there is no hiding from facts (e.g., buyer writes the check for the tariff). There is also no hiding from double-entry accounting. Someone pays the bill and they can eat it and lower margins or they can pass on the cost to consumers or the customer (whether a business or a consumer). They can also seek to offset tariff costs through lower capex or cutting headcount. That means someone else loses and the effect of “you can run but you cannot hide” from higher costs continues.
Food at home up 0.4% and food away from home at 0.5% is the part buyers feel first, before any rate chart. With the 2-year yield up 21 basis points on the print, I am telling buyers here in Michigan to watch Friday's PPI before assuming today's move is the end of it.
The food line is the detail that carries the most weight in the October report. Food at home rose 0.4% in October after three flat-to-negative months, and food away from home at 0.5% is the highest reading of 2026, which is hard to square with the idea that the inflation impulse has faded. The market's reaction tells the same story in rates terms: the 2-year Treasury yield rose 21 basis points and the 10-year Treasury yield rose 15 basis points on the print. With no October 2025 data for a year-on-year comparison, the month-on-month sequence is the cleanest read available, and the sequence points to persistence rather than a one-off. The producer price index release on Friday, November 13, 2026 will show whether the pressure is still building upstream.