| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.2% | 0.1% to 0.3% | 0.2% | 0.3% |
| CPI - Y/Y | 2.8% | 2.7% to 2.9% | 2.7% | 2.7% |
| Ex-Food & Energy- M/M | 0.3% | 0.2% to 0.4% | 0.3% | 0.2% |
| Ex-Food & Energy- Y/Y | 3.0% | 3.0% to 3.1% | 3.1% | 2.9% |
Highlights
July's consumer price inflation reading is benign on the surface, but contains signs underneath of the expected inflationary effects of higher tariffs. For example, prices for furniture, photographic equipment, vehicles rose on a monthly basis at the fastest rate since April or May. However, the fact that the impact is not more widespread might allow the Fed greater confidence to lower interest rates in September.
The Consumer Price Index in July slowed to +0.2 percent, following a 0.3 percent rise in June, and a 0.1 percent uptick in May. The July CPI reading matches expectations for a 0.2 percent rise in the Econoday survey of forecasters. This marks a return to the slower monthly pace of overall consumer price inflation seen between February and May.
Over the last 12 months, consumer prices are up 2.7 percent, matching the 2.7 percent year-over-year rise in June. Expectations in the Econoday survey were for a 2.8 percent increase.
Core CPI, excluding food and energy prices, is up 0.3 percent, after rising 0.2 percent in June, and +0.1 percent in May. Consumer prices less food and energy jumped 3.1 percent from July 2024, following a 2.9 percent year-over-year rise in June, and 3 percent expected in the Econoday survey.
After rising by 0.2 percent in June, shelter costs rose by 0.2 percent in July (and are up 3.7 percent year-over-year). Food prices were flat, after a 0.3 percent jump in June, with grocery prices down 0.1 percent last month, and restaurant prices rising 0.3 percent.
Energy costs contracted by 1.1 percent over the month, following a 0.9 percent spike in June dragged down by a 2.2 percent fall in gasoline prices.
Energy prices are down 1.6 percent year-over-year, following a 0.8 percent dip for the 12 months ending June. Food prices increased by x percent compared to July 2024, following a 3 percent rise in June.
The Consumer Price Index in July slowed to +0.2 percent, following a 0.3 percent rise in June, and a 0.1 percent uptick in May. The July CPI reading matches expectations for a 0.2 percent rise in the Econoday survey of forecasters. This marks a return to the slower monthly pace of overall consumer price inflation seen between February and May.
Over the last 12 months, consumer prices are up 2.7 percent, matching the 2.7 percent year-over-year rise in June. Expectations in the Econoday survey were for a 2.8 percent increase.
Core CPI, excluding food and energy prices, is up 0.3 percent, after rising 0.2 percent in June, and +0.1 percent in May. Consumer prices less food and energy jumped 3.1 percent from July 2024, following a 2.9 percent year-over-year rise in June, and 3 percent expected in the Econoday survey.
After rising by 0.2 percent in June, shelter costs rose by 0.2 percent in July (and are up 3.7 percent year-over-year). Food prices were flat, after a 0.3 percent jump in June, with grocery prices down 0.1 percent last month, and restaurant prices rising 0.3 percent.
Energy costs contracted by 1.1 percent over the month, following a 0.9 percent spike in June dragged down by a 2.2 percent fall in gasoline prices.
Energy prices are down 1.6 percent year-over-year, following a 0.8 percent dip for the 12 months ending June. Food prices increased by x percent compared to July 2024, following a 3 percent rise in June.
Market Consensus Before Announcement
The consensus looks for headline inflation up 0.2 percent on month and 2.8 percent on year in July after 0.3 percent and 2.7 percent on year in June. Core CPI is seen at 0.3 percent and 3.0 percent in July, up from 0.2 percent and 2.9 percent in June. Watch for more signs of tariffs boosting goods prices. In June core goods ex-autos rose by a scary 0.6 percent and analysts expect a similar rise in July. Autos are seen as another source of inflation trouble. Fortunately, services and housing are exerting disinflationary pressure to keep a lid on things.
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.
