The Bureau of Labor Statistics (BLS) announced today that the Consumer Price Index (CPI) had risen only 0.1% during September. This ties the June and August numbers for the smallest month-to-month change this year.

The CPI measures the prices we would pay if we bought a "market basket of goods and services" that the Department of Commerce has determined to be typical purchases for urban consumers.

During the third quarter, consumer prices rose at a seasonally adjusted annual rate of 1.8%. This compares with rises of 3.2% in both the first and second quarters. The annualized rise for the three quarters taken together is 2.8%. A plot of the CPI from the present back to the middle of the 1990-91 recession shows that the average annual rate of change of the CPI has been approximately 3% for the entire fifty-seven-month period. Taking a longer term view, the fifty-year record of the rate of change of the CPI reveals that the past fifty-seven months have been the most stable in the entire fifty years. Moreover, the 3% average level of inflation is the lowest sustained level since the early 1960's.

As I said last month---the next best thing to no inflation is a low and predictable rate of inflation, and that is exactly the situation that presently exists.

In other news, the Census Bureau today released it's advance estimate of U.S. retail sales for September. September's figure was 0.3% higher than the number for August.

Last month, in the 9-14 Today's Economy, I suggested that it would be a good idea to examine changes in the sales data over a longer period than a month. This was because of the frequent updates that are made on the monthly data after its initial release. In last month's column I presented a table showing the year-to-year percentage changes in retail sales for the years ending in June, July, and August of this year. The table below updates that table by including the annual percentage change in retail sales for the year ended September.

                      June            July          August         September
Annual % Change
Total Retail Sales    +6.3            +5.7           +5.0            +4.5

It appears that the situation is little changed from last month. There is still a definite downward trend in the annual percentage change in total retail sales.

In still other news, the University of Michigan announced the preliminary estimate of the October value of it's index of consumer sentiment. Today's number was 90.4. The final number for September was 88.9.

How did the markets react to all this news? The bond market took the stable inflation data and the downward trending retail sales data as indications of a slowing economy. At the end of the day the 30-year T-bond was up more than a full point. The stock market fell in line with the bond market and the DJIA closed with a gain of almost 30 points.

Byline: Lafferty (MF Merlin)