A great CPI report. If you use the unrounded numbers the headline was actually -0.02%, deflation! Core was +0.3%, the lowest since September 2021. The more intertial parts of core, eg rent, slowed too.
I only update a little based on 1 month but the update is a good one.
I only update a little based on 1 month but the update is a good one.
Here is the monthly and three month core (which excludes volatile food and energy). If we repeated the July number every month for a year would have 3.8% inflation, which is too high.
The last three months have been a 6.8% annual rate.
But coming down.
The last three months have been a 6.8% annual rate.
But coming down.
This is one that gives me a lot of hope. Core goods are still rising but should turn to zero. But core services, which are more wage/cyclically sensitive, slowed dramatically to the lowest pace since September 2021.
This is core goods and services over 12 months, we'll soon be at the place where they cross and services are bigger.
If you wanted to be a curmudgeon you would note that pandemic services were down (led by transportation services at -0.5%) and so the "other" category that me and many have been focused on rose more than core. But still less than recent months.
Finally US and European inflation have the same headline number (8.9% over 12 months measured in a comparable way--many show them in a non comparable way). But US core still running 1.9pp higher than European core.
We're still WAY above the Survey of Professional Forecasters May forecast. To hit that forecast would need every month for the rest of the year to be 0.0% headline and 0.1% core.
In sum this is a good data point. Should reassure us a little. But we had a false dawn in September 2021. Moreover, even this pace of core inflation would be too high. But this was a really good month for inflation. Or should I say, deflation.
P.S. Later today the Cleveland Fed will calculate median and trimmed mean CPI based on these BLS data. They are another measure of underlying inflation (and I'm increasingly convinced superior based on new research I've been reading and doing). Will tweet them out when released.
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