| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.2% | 0.1% to 0.4% | 0.2% | 0.2% |
| CPI - Y/Y | 3.3% | 2.8% to 3.5% | 3.2% | 3.0% |
| Ex-Food & Energy- M/M | 0.2% | 0.1% to 0.4% | 0.2% | 0.2% |
| Ex-Food & Energy- Y/Y | 4.8% | 4.6% to 4.9% | 4.7% | 4.8% |
Highlights
Consumer prices were up 0.2 percent on the month, as was the core CPI excluding food and energy, as expected. The year-over-year headline index increased 3.2 percent after 3.0 percent in June, while the core index was up 4.7 percent, a slowdown from 4.8 percent the previous month and the smallest gain since October 2021.
While monthly gains were steady for both the headline and core indices, the further slowdown in the 12-month core CPI is a welcomed development for the Federal Reserve and could reinforce expectations of a status quo.
With another 0.4 percent increase from June, the index for shelter accounted for 90 percent of the monthly CPI advance. Shelter prices were up 7.7 percent year-over-year. Higher prices for motor vehicle insurance also boosted the CPI.
Food prices appreciated 0.2 percent on the month and 4.9 percent from a year earlier, and energy edged up 0.1 percent, for a 12-month decline of 12.5 percent.
Among other key categories, medical care services fell 0.4 percent, used cars and trucks were down 1.3 percent, and new vehicles down 0.1 percent. Transportation rose 0.3 percent and apparel was flat on the month.
With today's data, including initial claims that came in above expectations, Econoday's Consensus Divergence Index, at minus 15 both overall and when excluding prices, is within a zone consistent with an economy that is slightly underperforming, providing breathing room to the FOMC.
While monthly gains were steady for both the headline and core indices, the further slowdown in the 12-month core CPI is a welcomed development for the Federal Reserve and could reinforce expectations of a status quo.
With another 0.4 percent increase from June, the index for shelter accounted for 90 percent of the monthly CPI advance. Shelter prices were up 7.7 percent year-over-year. Higher prices for motor vehicle insurance also boosted the CPI.
Food prices appreciated 0.2 percent on the month and 4.9 percent from a year earlier, and energy edged up 0.1 percent, for a 12-month decline of 12.5 percent.
Among other key categories, medical care services fell 0.4 percent, used cars and trucks were down 1.3 percent, and new vehicles down 0.1 percent. Transportation rose 0.3 percent and apparel was flat on the month.
With today's data, including initial claims that came in above expectations, Econoday's Consensus Divergence Index, at minus 15 both overall and when excluding prices, is within a zone consistent with an economy that is slightly underperforming, providing breathing room to the FOMC.
Market Consensus Before Announcement
Core prices in July are expected to hold steady at a modest monthly increase of 0.2 percent which would match June's showing. Overall prices are also expected to rise 0.2 percent which would also match June. Annual rates, which in June were 3.0 percent overall and 4.8 percent for the core, are expected at 3.3 and 4.8 percent, respectively.
Definition
The CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
Description
The consumer price index is the most widely followed monthly indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
