Announced this morning, the headline Consumer Price Index (CPI) increased 0.4% in August, higher than expected and is two tenths higher than last month’s increase. On an annual basis it grew 2.9%, as expected. The core rate, which excludes prices for food and energy, increased 0.3% in August, as expected, and the same as last month’s increase. It grew 3.1% on an annual basis, the same as the previous month. Meanwhile, Initial Jobless Claims were 263,000 for the week ending September 6th, much higher than expected and 27,000 more than the previous week.
Looking at the individual categories for the CPI, monthly prices for Gasoline, up 1.9%, Used Cars and Trucks, up 1.0%, and Transportation Services, up 1.0%, were relatively strong while monthly prices for Utility (piped gas) services, down -1.6%, and Medical Care services, down -0.1%, were relatively weak. Prices for Shelter were up 0.4%, two tenths higher than the previous month.
Overall, both the headline and core CPI increased in August. Notable categories which saw increases were used cars and trucks and shelter costs. On an annual basis, the core rate remains well above the Federal Reserve’s stated 2% target. Inflation measures are still elevated at the consumer level, despite a reprieve in the producer price index numbers earlier this week. The economy is still working through the impact of tariffs coming through the supply chain.
Meanwhile Initial claims jumped higher in the holiday shortened week, highlighting the weak labor market figures the recent payrolls report. However, initial claims are still below the 300k that many consider the top threshold for a healthy labor market. As long as inflation measures stay elevated, it may be difficult for the Federal Reserve to fully focus on weak labor market data as part of their policy decisions in the months ahead.
In all, the 10-year US treasury yield ticks lower following the report and equity futures are higher as we head into the market open.
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