Consumer Inflation Below Average, Housing Starts Fall

- The Consumer Price Index for September rose .3% versus estimates of a .2% gain and a -.1% decline in August.

- The CPI Ex Food and Energy for September rose .2% versus estimates of a .2% increase and a .2% gain in August.

- Housing Starts for September fell to 1191K versus estimates of 1280K and 1327K in August.

- Building Permits for September fell to 1226K versus estimates of 1285K and 1322K in August.

BOTTOM LINE: Prices paid by US consumers rose more than forecast in September, while the core measure showed inflation remains contained, Bloomberg reported. With inflation under control, the Fed has the leeway to cut the fed funds rate if necessary at the upcoming meeting later this month. The CPI is now rising at a 2.8% rate year-over-year versus the long-term average of 3.1%. As well, the core CPI is rising at a 2.1% rate, well below the long-term average of 3.0%. I continue to believe inflation has peaked for this cycle and that the secular trend of disinflation will eventually re-assert itself.

Housing starts in the US dropped more than forecast to a 14-year low in September, Bloomberg reported. Starts fell 28% in the Midwest, 12% in the South and 10% in the West. Starts jumped 45% in the Northeast. I continue view the decline in home construction as a positive as builders work down excessive inventories. Residential construction will likely remain weak through next year.