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CPI: Core Gains Continue, Yearly Gains Still over 2%

September 12, 2019

Bottom Line: Core consumer price inflation was slightly higher than expected in August, driven by a second straight month of higher used card prices, as well as higher prices in medical car services and airfares. Owner's Equivalent Rent, a key measure of the price of shelter, has decelerated again after some volatility -- 2.97% annualized over the last three months versus 3.5% over the last six months and 3.34% year-on-year. Expect that to remain steady in the 3.0-3.5% area. Overall, core inflation remains modest but is accelerating slightly with core averaging 3.42% annualized over the last 3 months, 2.5% annualized over the last 6 months, and 2.39% year-on-year.

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


  • Food prices declined slightly, while energy prices fell by 1.9%.
  • Prices for gasoline fell by 3.5% while prices for fuel oil declined by 0.5%, prices for electricity slipped by 0.3%, but prices for natural gas rose by 0.1%.
  • Energy prices are now 4.4% BELOW their year ago level.
  • Overall consumer prices are now 1.8% ABOVE their year ago level; in August 2018, consumer prices were 2.7% ABOVE their year ago level.
The Core CPI ROSE by 0.3%, compared with market expectations for an increase of 0.2%.

  • Prices for commodities excluding food and energy commodities rose by 0.2%.
  • Gains in used cars & trucks (+1.1%), tobacco (+0.5%), were offset by declines in new vehicles (-0.1%).
  • Prices for services excluding energy services rose 0.3% with moderate increase in medical care services (+0.9%), transportation (+0.4%), and owner's equivalent rent (+0.2%).
  • Core consumer prices are now 2.4% ABOVE their year ago level; in August 2018, consumer prices were 2.2% ABOVE their year ago level.

Article by Contingent Macro Advisors