U.S. July CPI - Core below 0.2% before rounding for a third straight month
July CPI is consistent with inflationary pressures continuing to ease towards target with gains of 0.2% overall and ex food and energy as expected, but before rounding the gains were only 0.155% and 0.165% respectively.
Shelter inflation persists, with a 0.4% rise accounting for nearly 90% of the overall gain, with owner’s equivalent rent at 0.362%, up from 0.276% in June, though still softer than the gains of February through May that were all rounded down to 0.4%, suggesting trend even here is easing.
Commodities less food and energy at -0.3% were below trend, with used autos at -2.3% showing a particularly sharp decline and apparel also weak at -0.4%. Energy and gasoline were both unchanged after two straight dips while food showed a subdued gain of 0.2%.
Services less energy saw a 0.3% increase, up from 0.1% in June and 0.2% in May, supported by shelter with services less rent of shelter unchanged. There were some other areas of strength. A 0.4% gain in transportation services saw a 1.2% rise in autos insurance outweighing a 1.6% decline in air fares.
Recreation services at 0.4% were also above trend, largely on what looks like a one-time 7.6% bounce in subscription and rental of video and video games. On the downside, medical care services saw an unusual decline of 0.3%.
While July’s data is not quite as soft as June’s and there are a few areas of strength this is a third straight core rate that rose by less than 0.2% before rounding and that is consistent with inflation moving back towards target. Yr/yr growth slipped to 2.9% from 3.0%, reaching its slowest since March 2021 while the yr/yr core rate at 3.2% from 3.3% is the slowest since April 2021.
