CPI: Energy Prices Increase, Core Inflation Modest

June 16, 2016
Bottom Line: Headline consumer inflation increased in May less than market expectations as higher energy prices were partially offset by lower food prices. Consumer prices are now 1.1% above their year ago level. Meanwhile, core consumer prices rose modestly, in line with market expectations and are now 2.2% above their year ago level. Owners' Equivalent Rent (a major component of CPI that is an estimate of the cost of shelter) rose by 0.35%, 3.3% year-over-year and has moved up 50 bps over the past year. Overall inflationary pressures at the consumer level still remain modest but are rising now compared to year-ago levels. The CPI ROSE by 0.2% in May, compared with market expectations for an increase of 0.3%. Food prices declined by 0.2% while energy prices increased by 1.2%. Prices for gasoline rose by 2.3% while prices for fuel oil increased by 4.2%, prices for electricity slipped by 0.2%, but prices for natural gas rose by 1.7%. Energy prices are still 9.8% BELOW their year ago level. Overall consumer prices are now 1.1% ABOVE their year ago level; in May 2015, consumer prices were unchanged compared to their year ago level. The Core CPI ROSE by 0.2%, in line with market expectations. Prices for commodities excluding food and energy commodities fell by 0.2%. Gains in apparel (+0.8%) and tobacco (+0.2%) were partially offset by declines in used cars & trucks (-1.3%), medical care (-0.2%), new vehicles (-0.1%) and alcoholic beverages (-0.1%). Prices for services excluding energy services rose 0.3% with moderate increases in medical care services (+0.5%), shelter (+0.4%) and owner's equivalent rent (+0.35%). Core consumer prices are now 2.2% ABOVE their year ago level; in May 2015, consumer prices were 1.7% ABOVE their year ago level.
Article by contingentmacro