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CPI: Touch Stronger Than Expected

September 14, 2017
Bottom Line: CPI beat expectations for the first time in 5 months as modestly higher hotel prices drove the shelter component. Owners' Equivalent Rent (a major component of CPI that makes up most of the cost of shelter component) rose by 0.3%, 3.3% year-over-year, still down 60bps from the pace of 2016. On a trend basis there is little to suggest the August reading is a shift in trend. Apparel, new and used cars and even medial care cost growth remains tepid. While some components that had moved sharply lower earlier this year (airfares and cell phone service, for instance) will start to mathematically bring core CPI back up as they stabilize, there is little to suggest a change in trend from the 1.7 - 2.2% range for core CPI.

The CPI ROSE by 0.4% in August, compared with market expectations for an increase of 0.3%.
  • Food prices increased by 0.1% while energy prices rose by 2.8%.
  • Prices for gasoline rose by 6.3% while prices for fuel oil increased by 3.9%, prices for electricity climbed by 0.0%, but prices for natural gas fell by 0.5%.
  • Energy prices are now 6.4% ABOVE their year ago level. Overall consumer prices are now 1.9% ABOVE their year ago level; in August 2016, consumer prices were 1.1% ABOVE their year ago level.

The Core CPI ROSE by 0.2%, compared with market expectations for an increase of 0.2%.
  • Prices for commodities excluding food and energy commodities fell by 0.1%.
  • Gains in alcoholic beverages (+0.1%), apparel (+0.1%), were offset by declines in used cars & trucks (-0.2%), tobacco (-0.1%).
  • Prices for services excluding energy services rose 0.4% with moderate increase in shelter (+0.5%), transportation (+0.4%), and owner's equivalent rent (+0.3%).
  • Core consumer prices are now 1.7% ABOVE their year ago level; in August 2016, consumer prices were 2.3% ABOVE their year ago level.