July CPI
Updated 13-Aug-10 09:24 ET
Highlights
- After three months of declines, consumer prices rose 0.3% in July. The Briefing.com consensus called for the CPI index to increase only 0.2%.
- Excluding food and energy, consumer prices increased 0.1%, exactly what the consensus expected.
Key Factors
- There was nothing abnormal in the core data as inflation remained mild. Year-over-year core prices held at 0.9% for the fourth consecutive month. This is the lowest level of inflation that the U.S. has witnessed since the mid 1960s, and the report does nothing to suggest that the Fed is going to have to fight inflationary pressures anytime soon.
- Just about all of the major consumption sectors showed positive growth, which should temper the deflation talk for the time being.
- The majority of the increase in headline prices came from the energy sector. Energy prices increased 2.6% in July due to a 4.6% increase in gasoline prices. Yet, the growth in gas prices was completely due to seasonal adjustments. The EIA previously announced that gasoline prices remained at their June levels and the nonseasonally adjusted CPI index revealed a miniscule 0.1% decline during the month. If gasoline prices remain at their current level in August, we believe energy prices will act as a drag on the inflation data.
- Food prices fell 0.1% in July as fruits and vegetable prices continue their downward trend after spiking in March. There are some worries that food prices will start trending upward as agricultural futures spiked following the Russian grain shortage. However, consumers will probably not witness these effects for at least another month.
Big Picture
- The CPI data are pleasing with respect to inflation expectations and fit with the Fed's prevailing view at the moment that exceptionally low levels of the federal funds rate are likely to be warranted for an extended period.
| Category |
JUL |
JUN |
MAY |
APR |
MAR |
| All Items |
0.3% |
-0.1% |
-0.2% |
-0.1% |
0.1% |
| Food and Beverages |
0.0% |
0.0% |
0.0% |
0.2% |
0.2% |
| Housing |
0.1% |
-0.1% |
0.0% |
-0.1% |
0.1% |
| Equivalent Rent |
0.1% |
0.1% |
0.0% |
0.0% |
-0.1% |
| Apparel |
0.6% |
0.8% |
0.2% |
-0.7% |
-0.4% |
| Transportation |
1.3% |
-1.0% |
-1.2% |
-0.5% |
-0.1% |
| Vehicles |
0.3% |
0.3% |
0.2% |
-0.2% |
0.2% |
| Motor Fuel |
4.6% |
-4.5% |
-5.2% |
-2.4% |
-0.8% |
| Medical Care |
-0.1% |
0.3% |
0.1% |
0.2% |
0.3% |
| Educ and Commun |
0.2% |
0.1% |
0.1% |
0.25% |
0.3% |
| Special Indices |
|
|
|
|
|
| Core |
0.1% |
0.2% |
0.1% |
0.0% |
0.0% |
| Energy |
2.6% |
-2.9% |
-2.9% |
-1.4% |
0.0% |
| Services |
0.2% |
0.0% |
0.1% |
0.1% |
0.2% |
