• All items CPI rose 0.1% month-over-month in June with the year-over-year rate ticking up to 2.9%. That was in line with market expectations ahead of the report.
  • Gasoline prices rose another 0.5% in June and were up 24% from a year ago.
  • Core (ex-food & energy) prices rose 0.2% from May to push the year-over-year rate up to 2.3% in June from 2.2% a month earlier.

Our Take:

U.S. CPI growth was in line with expectations in June. Headline growth ticked up to 2.9% on a year-over-year basis from 2.8% in May and marking the largest increase in more than 6 years. A big chunk of that growth is still due to energy prices which were up 12.0% from a year ago. Core (ex-food & energy) price growth has also been drifting slowly higher, though, with another tick higher to 2.3% in June from 2.2% in May. Commodity prices excluding food & energy products were still down slightly from a year ago in June — so little evidence that tariff-related hikes in producer costs for some products (eg. steel) are flowing in a significant way to consumer prices as yet. The less-tradeable services ex-energy component rose to 3.1% on a year-over-year basis, up from 3.0% in May and 2.5% at this time a year ago. The firming price growth backdrop should continue to confirm Fed policymakers’ suspicions that the economy is running close to capacity limits even as growth continues to be boosted by fiscal policy. The data remains fully consistent with the Fed continuing to hike rates at a gradual pace.

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