Consumer prices slightly accelerated their creep higher in July, rising 0.2 percent for the overall index as well as for the core (ex-food ex-energy). Year-on-year, prices were up 2.9 percent for the overall, unchanged from June as expected, but up 1 tenth to 2.4 percent for the core, exceeding consensus expectations and posting the strongest gain since September 2008.
Accounting for almost 60 percent of the monthly increase for the overall index in July was the index for shelter, which rose 0.3 percent on the month, putting the year-on-year increase at 3.5 percent. Housing prices were up 0.2 percent in July after a flat reading in June, with large owners' equivalent rent rising 0.3 percent.
Food and beverage prices were up a slight 0.1 percent in July, with the major grocery store food group indexes mixed.
A major factor holding down the overall index in July was energy prices, which fell again and were down 0.5 percent in July after a 0.3 percent decline in June, with gasoline down 0.6 percent, electricity down 0.4 percent, and gas utilities 0.5 percent lower. But energy prices still lead in pushing up the year-on-year overall inflation rate, with the energy index up 12.1 percent over the last year as gasoline prices rose 25.4 percent and fuel oil 34.7 percent.
Transportation prices continued to show pressure with a 0.3 percent monthly gain, putting the yearly rate at 7.3 percent.
After posting strong gains in June, vehicle prices rose sharply again in July, up 0.3 percent for new vehicles with used cars and trucks up 1.3 percent. Year-on-year, however, new vehicles are up only 0.2 percent and used cars and trucks up just 0.8 percent.
Medical care prices fell back by 0.2 percent after rising 0.4 percent in the previous month, with the year-on-year rate at a subdued 1.9 percent.
Prices of apparel continued to fall and were down 0.3 percent in July after dropping 0.9 percent in the previous month. Apparel prices are up just 0.3 percent year-on-year.
Yesterday's producer price report was slightly weaker than expected and calmed inflation fears but but today's data on consumer prices shows core inflation reaching the highest level in nearly 10 years and may lead to more hawkishness at the Fed.
The Consumer Price Index is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group, representing about 87 percent of the population. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
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