| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.1% | 0.0% to 0.2% | -0.1% | 0.0% |
| CPI - Y/Y | 3.1% | 3.1% to 3.3% | 3.0% | 3.3% |
| Ex-Food & Energy- M/M | 0.2% | 0.1% to 0.3% | 0.1% | 0.2% |
| Ex-Food & Energy- Y/Y | 3.5% | 3.4% to 3.5% | 3.3% | 3.4% |
Highlights
The CPI for June is down 0.1 percent month-over-month after no change in May. This is the first time the CPI has seen a monthly decline since down 0.1 percent in May 2020. The decrease is below the consensus of up 0.1 percent in the Econoday survey of forecasters. The dip in the index reading is mainly related to a 2.0 percent fall in energy prices in June, while food and beverage costs are up 0.2 percent. The CPI excluding food and energy is up 0.1 percent in June from May after up 0.2 percent in May from April. The Econoday survey consensus looked for up 0.2 percent in June.
The CPI is up 3.0 percent year-over-year in June, down 3 tenths from 3.3 percent in May and below the consensus of 3.1 percent in the Econoday survey. The core CPI is up 3.3 percent in June from a year ago compared to 3.4 percent in May and is 2 tenths below the consensus of 3.5 percent in Econoday's survey.
Fed policymakers will find evidence here that the downward trend for disinflation has resumed and is likely to continue. However, policymakers will also pay close attention to readings for the most persistent sources of upward price pressures. Some of these remain elevated. The report will be enough to get the FOMC to be more inclined to lower interest rates soon, but not enough to prompt them to act at the July 30-31 meeting.
No detail is likely to get more attention than the CPI for shelter costs. Month-over-month rises in shelter costs moderated to up 0.2 percent in June after 0.4 percent in May, the lowest monthly increase since 0.2 percent in August 2021. Year-over-year increase in shelter prices is 5.2 percent in June, down from 5.4 percent in May. This is the smallest year-over-year increase since 5.1 percent in April 2022. Shelter prices about 1/3 of the CPI basket of goods and services have been slow to reflect underlying changes in rental costs while owners' equivalent rent is rising along with home values.
The CPI excluding shelter only is down 0.2 percent month-over-month in June and up 1.8 percent year-over-year. The CPI excluding food, energy, and shelter is flat in June from May and up 1.8 percent year-over-year. Taken together, there's a good hint here that the Fed's 2 percent inflation objective is reachable. However, it is also important to remember that so far much of the improvement lies in commodities prices while upward pressure on services prices has yet to yield.
The CPI for commodities only is down 0.4 percent in June from May and down 0.4 percent year-over-year. The CPI for services is up 0.1 percent in June from the prior month and up 5.0 percent compared to June 2023. Upward price pressures are easing for services, but significant gains remain. The special aggregate of the CPI services less rent of shelter is unchanged in June from May, and unchanged in May from April, while it is up 4.8 percent compared to a year ago.
The CPI is up 3.0 percent year-over-year in June, down 3 tenths from 3.3 percent in May and below the consensus of 3.1 percent in the Econoday survey. The core CPI is up 3.3 percent in June from a year ago compared to 3.4 percent in May and is 2 tenths below the consensus of 3.5 percent in Econoday's survey.
Fed policymakers will find evidence here that the downward trend for disinflation has resumed and is likely to continue. However, policymakers will also pay close attention to readings for the most persistent sources of upward price pressures. Some of these remain elevated. The report will be enough to get the FOMC to be more inclined to lower interest rates soon, but not enough to prompt them to act at the July 30-31 meeting.
No detail is likely to get more attention than the CPI for shelter costs. Month-over-month rises in shelter costs moderated to up 0.2 percent in June after 0.4 percent in May, the lowest monthly increase since 0.2 percent in August 2021. Year-over-year increase in shelter prices is 5.2 percent in June, down from 5.4 percent in May. This is the smallest year-over-year increase since 5.1 percent in April 2022. Shelter prices about 1/3 of the CPI basket of goods and services have been slow to reflect underlying changes in rental costs while owners' equivalent rent is rising along with home values.
The CPI excluding shelter only is down 0.2 percent month-over-month in June and up 1.8 percent year-over-year. The CPI excluding food, energy, and shelter is flat in June from May and up 1.8 percent year-over-year. Taken together, there's a good hint here that the Fed's 2 percent inflation objective is reachable. However, it is also important to remember that so far much of the improvement lies in commodities prices while upward pressure on services prices has yet to yield.
The CPI for commodities only is down 0.4 percent in June from May and down 0.4 percent year-over-year. The CPI for services is up 0.1 percent in June from the prior month and up 5.0 percent compared to June 2023. Upward price pressures are easing for services, but significant gains remain. The special aggregate of the CPI services less rent of shelter is unchanged in June from May, and unchanged in May from April, while it is up 4.8 percent compared to a year ago.
Market Consensus Before Announcement
Overall prices are expected to rise 0.1 percent in June after coming in unchanged in May which was way below expectations. Core prices increased 0.2 percent in May which was slightly below expectations with June's consensus also at 0.2 percent. Annual rates, which in May were 3.3 percent overall and 3.4 percent for the core, are expected at 3.1 and 3.5 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.
