U.S. Inflation Eased in October as the Economy Cooled

Consumer prices rose 3.2 percent in the year through October, decelerating from the previous month and showing encouraging signs under the surface.

As expected, President Biden celebrated the report. “Today we saw more progress bringing down inflation while maintaining one of the strongest job markets in history,” he said in a statement.

Biden’s statement has a feistier tone than in previous months, perhaps reflecting calls by Democrats for him to emphasize efforts to tame inflation. “I’m working to get results for the American people and it’s happening—and I’m not going to let up for one second,” he said. “I’m fighting every single day to continue lowering costs for hardworking families so they have more breathing room—from eliminating costly junk fees on air fares and event tickets, to cutting prescription drug costs and health care premiums, to reducing energy costs.”

On an unrounded basis, overall prices rose 0.0449 percent in October from a month earlier. That gets rounded to 0.0 percent in the official report.

Housing costs rose more slowly in October.

Housing costs rose more slowly last month, an encouraging sign of progress for one of the most stubborn holdouts in the battle to bring down inflation.

Shelter costs rose 0.3 percent in October, down from 0.6 percent in September — reversing a surprising acceleration that had alarmed some economists. Prices were up 6.7 percent from a year earlier — the first time inflation in that category has fallen below 7 percent in more than a year.

Rents were up 7.2 percent, down from a peak of close to 9 percent earlier this year.

Private rental indexes from companies like Zillow and Apartment List have been slowing for more than a year, and even show rents falling outright in some markets. But the government’s measure of rents has been slower to moderate, in part because it includes all rental homes, not just those that turn over to new tenants.

Most economists are confident that the government measure of rents will converge with the private measures eventually, but they aren’t sure about the timing.

Fed officials and other economists pay close attention to shelter costs because housing is the largest monthly expense for most households and is therefore a major component of inflation measures like the Consumer Price Index. And unlike more volatile price categories like gasoline or airfare, rents tend to be “sticky”: once landlords raise rent, they rarely lower it.

Food price increases slowed from a year ago.

Food inflation continued to ease in October compared to a year ago, as prices for some products like fresh vegetables, cereal and coffee declined. But the price of food picked up slightly over the month.

Overall, food prices climbed 0.3 percent in October, an increase from September, when prices rose 0.2 percent.

Food price increases have slowed in recent months as supply shocks have abated and transportation costs have eased, providing some relief to consumers at the grocery store. Economists said they expected food costs to continue moderating in the coming months, although geopolitical turmoil and extreme weather could push up prices more than expected.

Michael Swanson, the chief agricultural economist at Wells Fargo, said he anticipated grocery price growth to cool substantially over the next few months. He said he also expected menu prices at restaurants to ease, but those prices have not cooled as much because business owners have struggled to deal with higher labor costs. Wage growth has moderated in recent months, but it is still elevated compared to prepandemic levels.

Companies that sell household staples are starting to slow down price increases as shoppers pinched by inflation start pulling back.

The price of consumer goods has soared for more than a year as companies say they are dealing with higher costs like labor and ingredients. At the same time, many of those companies have reported growing profits as they sell fewer products but with higher price tags.

Stock futures rose sharply following the fresh numbers, up almost 1 percent for the day on the S&P 500. It appears the cooler numbers have heightened hopes among investors that the Fed will keep interest rates steady going forward, with the two-year Treasury yield, which is sensitive to changes in interest rates expectations, falling markedly.

Today’s inflation data will inform the debate at the Federal Reserve about whether a final quarter-point interest rate increase is necessary. Ahead of the report, traders put a 14 percent chance of an increase at the Fed’s meeting in December. The probability is higher for January, at 27 percent, but still tilts toward rates staying put.

Airfares to many popular destinations have recently fallen to their lowest levels in months, and even holiday travel is far cheaper than it was last year, providing some welcome relief to consumers who have been frustrated for months by high prices for all manner of goods and services.

The glut of deals suggests that the airline industry’s supercharged pandemic recovery may finally be slowing as the supply of tickets catches up and, on some routes, overtakes demand, which appears relatively robust.

Consider the fares that Denise Diorio, a retired teacher in Tampa, Fla., recently scored. She spent less than $40 on flights to and from Chicago and paid just $230 for a round-trip ticket from New York to Paris and back, a trip she plans to take this month.

“I’ve been telling all my friends, ‘If you want to go somewhere, get your tickets now,’” she said.

The bargains she found may be exceptional, but Ms. Diorio is right that deals abound.

Early this month, the average price for a domestic flight around Thanksgiving was down about 9 percent from a year ago. And flights around Christmas were about 18 percent cheaper, according to Hopper, a booking and price-tracking app. Kayak, the travel search engine, looked at a wider range of dates around the holidays and found that domestic flight prices were down about 18 percent around Thanksgiving and 23 percent around Christmas.

“In a lot of cases, we’re seeing some of the lowest fares that we’ve seen really since travel started coming back after the drop-off in 2020,” said Kyle Potter, executive editor of Thrifty Traveler, a travel blog and deal-watching service.

Domestic ticket prices fell over the summer, Mr. Potter said, and deals on international travel, particularly to Europe, have become more common recently.

Airlines lower their fares when they are trying to get more people to book tickets as demand is slowing or they are facing stiffer competition. There’s little question that competition has intensified on some routes, but travel experts say it’s not clear whether demand is waning.

Thanksgiving this year is expected to set a record for air travel, with nearly 30 million passengers forecast, according to Airlines for America, an industry group. That would be about 9 percent more than last year and 6 percent more than in 2019, before the pandemic.

But some airlines say demand is slowing outside of holiday and other peak travel periods. In addition, some airports have been so flooded with flights that carriers have been forced to cut fares to fill planes.

That hadn’t been much of a problem for most of the recovery from the pandemic. Weather and other disruptions limited the supply of flights last year and in 2021, as did shortages of trained pilots, parts and planes, among other factors. That drove up ticket prices, kept planes full and helped airlines take in strong profits.

“The airline industry has never delivered the types of profit margins and return on capital that it has done over the last 2.5 years,” said John Grant, chief analyst with OAG, an aviation advisory and data firm. “We’re getting back to a more normal industry.”

For the largest U.S. airlines, the good times have continued, fueled in particular by thriving demand for international travel. But smaller and low-fare carriers have started to suffer. Several reported disappointing financial results for the three months that ended in September. Executives at those airlines have said demand is weakening, fares are falling and costs remain high. They also say bad weather and a shortage of air traffic controllers have made flying more difficult.

JetBlue Airways, for example, lost $153 million in the third quarter, compared with a $57 million profit in the same period last year. The company said recently that it was moving flights away from crowded markets, such as New York, to those where it expected stronger performance, such as the Caribbean. The budget carriers Spirit Airlines and Frontier Airlines recently told investors that they were looking to cut costs by tens of millions of dollars.

Competition has been fierce in some important markets, driving down fares and profits.

In Denver, where Frontier is based, about 14 percent more seats were available on flights this summer than in the summer of 2019, according to Cirium, an aviation data provider. Miami and Orlando, Fla., two popular destinations served by many budget carriers, saw even larger increases in capacity.

But while airlines added flights in popular markets as they chased passengers, airports in other cities, including Los Angeles, a hub for several major airlines, had large declines in capacity from the summer of 2019.

“You’ll find that there’s a large correlation between the airlines that are doing well and the ones that are struggling, margin-wise, when you compare where their concentrations are,” Barry Biffle, Frontier’s chief executive, said last month on a conference call to discuss the airline’s third-quarter results.

When it comes to international routes, analysts are less certain of why fares are falling and whether they will remain low. The kinds of deals that Ms. Diorio got for her Paris trip could mean that larger airlines soon find themselves facing a financial squeeze or merely that the industry is returning to a prepandemic normal.

“Historically, demand to Europe softens in the winter,” said Steve Hafner, Kayak’s chief executive. “So I think that reflects normal trends.”

But demand for international travel could face challenges, partly because of the wars in the Middle East and Ukraine. Analysts also warn that many consumers may be less willing or able to splurge on travel than they were in the last couple of years, when they had pandemic savings to draw from. Even if demand remains strong, airlines risk offering too many seats on popular overseas routes.

Whatever the cause of the recent drop in fares, the deals are a welcome break to travelers from years of high prices, Mr. Potter said.

“Either way the recipe is there for cheap flights,” he said. “If it’s just a little bit of overcapacity, that’s a win for consumers. If travel demand is dropping, in some ways that’s an even bigger win for people who are never going to give up on travel.”