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CPI: Slower Core Price Growth

June 12, 2019

Bottom Line: Core consumer price inflation was a touch slower than expected as used car prices and auto insurance rates fell in May. Apparel prices were flat after several months of reported lower prices (mostly due changes in the methodology). Owner's Equivalent Rent, a key measure of the price of shelter, rose more slowly after several months of acceleration. Overall inflation for services is still accelerating slightly while core commodity prices (especially used cars and apparel) have fallen over the last 3-, 6- and even 12-months. That trend in core commodities bears watching as volatility in those segments can come on suddenly. Overall, core inflation remains modest (core averaging 1.61% annualized over the last 3 months, 2.0% year-on-year) with many of the "transient" factors that the Fed noted still putting downward pressures on prices in May.

The CPI ROSE by 0.1% in May, compared with market expectations for an increase of 0.1%.


  • Food prices increased by 0.26% while energy prices fell by 0.6%.
  • Prices for gasoline fell by 0.5% while prices for fuel oil increased by 0.3%, prices for electricity slipped by 0.8%, and prices for natural gas fell by 1.0%.
  • Energy prices are now 0.5% BELOW their year ago level.
  • Overall consumer prices are now 1.8% ABOVE their year ago level; in May 2018, consumer prices were 2.7% ABOVE their year ago level.
The Core CPI ROSE by 0.1%, 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 (+0.4%), tobacco (+0.4%), were offset by declines in used cars & trucks (-1.4%), medical care (-0.4%).
  • Prices for services excluding energy services rose 0.2% with moderate increase in medical care services (+0.5%), owner's equivalent rent (+0.3%), and shelter (+0.2%).
  • Core consumer prices are now 2.0% ABOVE their year ago level; in May 2018, consumer prices were 2.2% ABOVE their year ago level.

Article by Contingent Macro Advisors