U.S. CPI Firms; Core Price Increase Also Picks Up

Consumer price inflation rose during August. The consumer price index increased 0.2% (1.1% y/y) following little change in July. A 0.1% increase had been expected in the Action Economics Forecast Survey. Prices excluding food & energy gained 0.3% (2.3% y/y), the strongest rise since February. A 0.2% increase had been expected.

Improved pricing power was evident throughout the report. Core service prices increased 0.3% (3.2% y/y) after a 0.2% rise. Medical care prices increased 0.9% (5.1% y/y), the strongest monthly increase since February 1984. Shelter prices rose 0.3% (3.4% y/y), and the annual change has been steadily improving following negative readings in 2010. The same is true for owners' equivalent rent of primary residences, which increased 0.3% (3.3% y/y). That compared to little change in 2010. Rents of primary residences also gained 0.3% (3.8% y/y), and the yearly increase was improved after remaining constant in 2010. Transportation services prices edged just 0.1% higher (3.1% y/y), the annual rise up from 1.9% in 2014. Recreation services prices eased 0.1%; however, their 3.1% y/y gain was stronger than the 1.8% rise in 2014. Education costs also fell 0.1%, and the annual gain of 2.7% compared to 7.1% growth in 2004.

Goods prices less food & energy gained 0.1% (-0.5% y/y), the first monthly increase since February. Medical care goods prices surged 1.1% (4.5% y/y), matching the strongest monthly gain since 1981. Annual growth of 4.5% was up from 0.4% in 2013. Apparel prices rose 0.2% (0.3% y/y) as a 1.2% increase (1.6% y/y) in men's clothing prices was counterbalanced by a 1.4% decline (-0.8% y/y) in women's wear costs. Recreation goods prices edged 0.1% higher (-3.1% y/y), but video & audio product prices fell 1.6% (-12.1% y/y). New vehicle prices remained steady both m/m and y/y. Appliance prices were off 0.5% (-3.0% y/y), the sixth monthly decline this year. Household furnishings & supplies costs eased 0.2% (-1.7% y/y).

Food prices remained little changed for the second consecutive month, and they were unchanged y/y as well. Egg prices collapsed 6.6% (-37.9% y/y), but meat prices improved 0.1% (-4.4% y/y). Fruit & vegetable prices were little changed (0.3% y/y) as were cereal & bakery costs (-0.7% y/y). Dairy product prices also were constant (-2.4% y/y), and non-alcoholic beverage prices eased 0.1% (-0.6% y/y).

The price of energy was similarly unchanged m/m (-9.2% y/y). Gasoline prices eased 0.9% (-17.8% y/y) following a 4.7% drop, while fuel oil & other fuel prices were off 1.5% (-7.7% y/y). These declines were offset by a 2.1% jump (1.1% y/y) in natural gas prices. Electricity prices gained 0.5% (-0.7% y/y).

The consumer price data is available in Haver's USECON database while detailed figures can be found in CPIDATA. The expectations figure is from Action Economics and is found in the AS1REPNA database.