- US core inflation slightly exceeded expectations
- Core services inflation accelerated
- The minor upside surprise rules at upsizing next week
- US CPI / core CPI, m/m % SA, August:
- Actual: 0.2 / 0.3
- Scotia: 0.2 / 0.2
- Consensus: 0.2 / 0.2
- Prior: 0.2 / 0.2
US core inflation picked up a touch last month and this finally rejects supersizing Fed cuts. There is no reason to supersize a cut next week versus sticking to the gradual mantra. Barring major developments, I can’t see a fifty move at all this year so pricing is too rich.
Core inflation was up by 0.28% m/m SA which rounds up to 0.3% on market screens. That was roughly a tick above just about everyone’s calls and while it doesn’t happen often, the Cleveland Fed’s nowcast was the raffle winner this time. The annualized rate was 3.4% m/m SAAR which is the highest since April (chart 1).
Expect core PCE to follow core CPI higher on September 27th (chart 2).
The culprit was a mild acceleration of core services prices. CPI services ex-housing and energy services was up by 0.33% m/m SA which is the firmest reading since April (chart 3). Services ex-energy services were up 0.4%.
CPI goods ex-food and energy was weak again, down -0.2% m/m SA (chart 4).
A key driver remains shelter prices that were up by 0.5% m/m SA with rent of primary residence up by 0.5%, and owners’ equivalent rent up 0.5% (charts 5, 6).
Airfare popped higher by +3.9% m/m against a trend of persistent declines over prior months (chart 7).
Other categories offered little by way of surprises. Gas fell by -0.6% m/m SA. New vehicles prices were down by -0.3% m/m SA, with used vehicles down -1% m/m SA. Groceries ("food at home") were flat. Eating-out proxies ("food away from home" that also includes cafeterias etc) increased by +0.3% m/m SA, extending the string of similar gains.
See the accompanying charts and tables for more details.
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