| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.3% | 0.3% to 0.4% | 0.4% | 0.2% |
| CPI - Y/Y | 2.9% | 2.8% to 3.0% | 2.9% | 2.7% |
| Ex-Food & Energy- M/M | 0.3% | 0.3% to 0.4% | 0.3% | 0.3% |
| Ex-Food & Energy- Y/Y | 3.1% | 3.1% to 3.1% | 3.1% | 3.1% |
Highlights
August's consumer price inflation rose a little faster than expected, powered by a surge in housing costs. The data also showed signs of the knock-on effects from higher tariffs. For example, used car prices jumped 1 percent on a monthly basis, and are up 6 percent compared to a year ago. Still, the slow pace of August wholesale price inflation, coupled with the larger-than-expected increase in initial jobless claims, should give the Fed cover for a rate cut at the September FOMC meeting.
The Consumer Price Index in August picked up to +0.4 percent, following a 0.2 percent rise in July, and a 0.3 percent uptick in June. The August CPI reading just beat expectations for a 0.3 percent rise in the Econoday survey of forecasters. This is in line with the hotter pace of overall consumer price inflation seen this summer as the tariffs filtered through to prices.
Over the last 12 months, consumer prices are up 2.9 percent, faster than the 2.7 percent year-over-year rise in July. Expectations in the Econoday survey were for a 2.9 percent increase.
Core CPI, excluding food and energy prices, is up 0.3 percent, after rising 0.3 percent in July, and +0.2 percent in June. Consumer prices less food and energy jumped 3.1 percent from August 2024, following a 3.1 percent year-over-year rise in July and 3.1 percent expected in the Econoday survey.
After rising by 0.2 percent in July, shelter costs jumped 0.4 percent in August (and are up 3.6 percent year-over-year). Food prices surged 0.5 percent, after no change in July, with grocery prices up 0.6 percent last month (another tariff effect most likely), and restaurant prices rising 0.3 percent.
Energy costs rose 0.7 percent over the month, following a 1.1 percent drop in July boosted by a 1.9 percent spike in gasoline prices.
Energy prices are down 0.2 percent year-over-year, following a 1.6 percent decline for the 12 months ending July. Food prices increased by 3.2 percent compared to August 2024, following a 2.9 percent rise in July.
The Consumer Price Index in August picked up to +0.4 percent, following a 0.2 percent rise in July, and a 0.3 percent uptick in June. The August CPI reading just beat expectations for a 0.3 percent rise in the Econoday survey of forecasters. This is in line with the hotter pace of overall consumer price inflation seen this summer as the tariffs filtered through to prices.
Over the last 12 months, consumer prices are up 2.9 percent, faster than the 2.7 percent year-over-year rise in July. Expectations in the Econoday survey were for a 2.9 percent increase.
Core CPI, excluding food and energy prices, is up 0.3 percent, after rising 0.3 percent in July, and +0.2 percent in June. Consumer prices less food and energy jumped 3.1 percent from August 2024, following a 3.1 percent year-over-year rise in July and 3.1 percent expected in the Econoday survey.
After rising by 0.2 percent in July, shelter costs jumped 0.4 percent in August (and are up 3.6 percent year-over-year). Food prices surged 0.5 percent, after no change in July, with grocery prices up 0.6 percent last month (another tariff effect most likely), and restaurant prices rising 0.3 percent.
Energy costs rose 0.7 percent over the month, following a 1.1 percent drop in July boosted by a 1.9 percent spike in gasoline prices.
Energy prices are down 0.2 percent year-over-year, following a 1.6 percent decline for the 12 months ending July. Food prices increased by 3.2 percent compared to August 2024, following a 2.9 percent rise in July.
Market Consensus Before Announcement
Rising core goods prices due to increasing tariff effects are giving us stiff monthly increases in CPI even as core services inflation fades. The consensus sees CPI up 0.3 percent on the month for total and core in August. The call for CPI on year is 2.9 percent and 3.1 percent for core. The numbers are not likely to change the Fed’s trajectory of rate cuts starting in September given the slowdown in job growth.
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.
