| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.2% | 0.0% to 0.3% | 0.2% | -0.1% |
| CPI - Y/Y | 3.0% | 2.9% to 3.0% | 2.9% | 3.0% |
| Ex-Food & Energy- M/M | 0.2% | 0.1% to 0.3% | 0.2% | 0.1% |
| Ex-Food & Energy- Y/Y | 3.2% | 3.2% to 3.3% | 3.2% | 3.3% |
Highlights
The July CPI rose 0.2 percent from June matching the consensus in the Econoday survey of forecasters. The core CPI excluding food and energy also rose 0.2 percent on the month in July and also matches the survey consensus. Food prices rose 0.2 percent on the month and were up 2.2 percent year-over-year. Energy prices were flat in July and up 1.1 percent on the year. In the energy CPI, gasoline prices in July were unchanged from the prior month and down 2.2 percent year-over-year.
Fed policymakers will likely find sufficient evidence in July that disinflation is making further progress to allow them to cut the fed funds target rate at their September 17-18 meeting, but not so much that it will accelerate the timeline of future consideration of removing a little more restriction from monetary policy.
While the year-over-year pace of rate increases is only slightly lower than the June report, it reflects continued progress in reducing upward price pressures. The annual CPI increase edged lower to 2.9 percent from 3.0 percent in June, a tenth below the survey consensus. The core CPI was up 3.2 percent after 3.3 percent in June to match the consensus. Upward price pressures remained absent in the commodities index which declined 0.4 percent year-over-year in July. Price pressures from services continue to dominate consumer costs with this index up 4.9 percent year-over-year in July, although a tad lower than 5.0 percent in June.
Shelter costs were up 0.4 percent in July and up 5.1 percent compared to July 2023. Shelter costs are decelerating only slowly and still a significant contributor to upward price pressure on services. The CPI excluding shelter only was unchanged in July from June and up 1.7 percent compared to July 2023. The special aggregate CPI for services less rent of shelter was unchanged in July compared to the prior month and was up 4.6 percent year-over-year.
Fed policymakers will likely find sufficient evidence in July that disinflation is making further progress to allow them to cut the fed funds target rate at their September 17-18 meeting, but not so much that it will accelerate the timeline of future consideration of removing a little more restriction from monetary policy.
While the year-over-year pace of rate increases is only slightly lower than the June report, it reflects continued progress in reducing upward price pressures. The annual CPI increase edged lower to 2.9 percent from 3.0 percent in June, a tenth below the survey consensus. The core CPI was up 3.2 percent after 3.3 percent in June to match the consensus. Upward price pressures remained absent in the commodities index which declined 0.4 percent year-over-year in July. Price pressures from services continue to dominate consumer costs with this index up 4.9 percent year-over-year in July, although a tad lower than 5.0 percent in June.
Shelter costs were up 0.4 percent in July and up 5.1 percent compared to July 2023. Shelter costs are decelerating only slowly and still a significant contributor to upward price pressure on services. The CPI excluding shelter only was unchanged in July from June and up 1.7 percent compared to July 2023. The special aggregate CPI for services less rent of shelter was unchanged in July compared to the prior month and was up 4.6 percent year-over-year.
Market Consensus Before Announcement
Overall prices are expected to rise 0.2 percent in July after unexpectedly falling 0.1 percent in June. Core prices increased only 0.1 percent in June which was also below expectations with July's consensus at the headline rate of plus 0.2 percent. Annual rates, which in June were 3.0 percent overall and 3.3 percent for the core, are expected at 3.0 and 3.2 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.
