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Economy in Brief

U.S. Consumer Price Index Increase Exceeds Expectations in July
by Tom Moeller  August 12, 2020

• Core goods & services pricing power firms.

• Energy prices continue to strengthen. 

• Food prices ease.

Pricing power at the retail level picked up last month as economic activity overall recovered in the spring. The Consumer Price Index increased 0.6% (1.0% y/y) during July, the same as in June. The rise compared to expectations for a 0.3% increase in the Action Economics Forecast Survey. These were the strongest monthly gains since 2012, double the highest increases of 2019. The CPI excluding food & energy also rose 0.6% (1.6% y/y) last month after improving 0.2% in June. The increase was the strongest since January 1991. It compared to expectations for a 0.2% rise.

Last month's pricing strength was broad-based. Goods prices excluding food & energy strengthened 0.7% (-0.5% y/y) after a 0.2% increase in June. The rise was led by a 2.3% jump (-0.9% y/y) in the cost of used cars & trucks. New vehicle prices also were firm and rose 0.8% (0.5% y/y). Apparel prices strengthened 1.1% (-6.5% y/y) after rising 1.7% in June. The cost of appliances also rose 1.1% (4.4% y/y) following a 1.7% jump. Prices of household furnishings rose 0.5% (1.5% y/y) after three straight months of 0.6% improvement. Recreation goods prices recovered 0.5% (-1.3% y/y) after falling or holding steady in each of the prior five months. Countering these increases was a decline in prices for education & communication goods which weakened 0.5% (-4.3% y/y), off for the third straight month. Prices for medical care goods eased slightly (1.1% y/y).

Services prices increased 0.6% (2.3% y/y) after a 0.3% rise. The cost of public transportation surged 3.4% (-16.1% y/y) following a 1.5% rebound in June. Education & communication prices strengthened 1.3% (2.9% y/y) as telephone costs rose 4.3% y/y. Medical care service prices improved 0.5% (5.9% y/y) for a second straight month. Shelter costs rose 0.2% (2.3% y/y) as the owners' equivalent rent of primary residences also increased 0.2%, but by a greatly reduced 2.8% y/y. Weakening were recreation services prices which fell 1.2% (+2.1% y/y) following a 0.9% decline.

Energy product prices were strong for a second straight month and jumped 2.5% (-11.2% y/y) in July following a 5.1% June gain. Gasoline prices increased 5.6% (-20.3% y/y) after strengthening 12.3% in June. Fuel oil prices rose 4.3% (-27.2% y/y) after rising 10.2%. Natural gas prices fell 1.0% (-0.3% y/y) but the cost of electricity rose 0.3% (-0.1% y/y).

Food prices fell 0.4% (+4.1% y/y) in July. Food at home prices declined 1.1% (+4.6% y/y). The fall was led by a 4.0% weakening (+7.3% y/y) in egg prices. Meat, poultry & fish prices also were off 3.7% (+8.5% y/y). Cereal & cereal product prices declined 1.2% (+1.8% y/y) and bakery product prices were little changed (NSA, +3.2% y/y). Fruit & vegetable prices rose 0.1% (2.3% y/y). Dairy & dairy product prices fell 0.8% (+4.4% y/y) after a 0.4% decline. Nonalcoholic beverage prices were off 0.5% (+5.0% y/y). Prices for food away from home rose 0.5% (NSA, 3.4% y/y) after 0.1% improvement in June.

The Consumer Price Index data can be found in Haver's USECON database with additional detail in CPIDATA. The Action Economics survey figure is in the AS1REPNA database.

Average-Inflation Targeting and the Effective Lower Bound from the Federal Reserve Bank of San Francisco is available here.

Consumer Price Index, All Urban Consumers (% chg) Jul Jun May Jul Y/Y 2019 2018 2017
Total 0.6 0.6 -0.1 1.0 1.8 2.4 2.1
Total less Food & Energy 0.6 0.2 -0.1 1.6 2.2 2.1 1.8
  Goods less Food & Energy 0.7 0.2 -0.2 -0.5 0.2 -0.2 -0.7
  Services less Energy 0.6 0.3 -0.0 2.3 2.8 2.9 2.7
 Food -0.4 0.6 0.7 4.1 1.9 1.4 0.9
 Energy 2.5 5.1 -1.8 -11.2 -2.1 7.5 7.9
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