If the Fed was looking for any confirmation as it entered its two day meeting that its monetary machinations are boosting inflation, at least according to the BLS’ hedonically, seasonally-adjusted CPI indicator, it did not get it. August CPI just printed at a measly 0.1% increase from July, below the 0.2% expected, and down from 0.2% last month. This was the lowest monthly increase in overall inflation since May, and the biggest miss to expectations in 4 months. On a Y/Y basis overall prices roses 1.5%, below the expected 1.6% and well below the 2.0% inflation in July. Core inflation excluding food and energy rose 1.8% in line with the expected number, and higher than the 1.7% a month ago. Perhaps the best news is that according to the BLS, “the index for nonalcoholic beverages declined in August, falling 0.1 percent.” It is unclear what if any hedonic adjustments were used in this particular calculation. As a reminder, the Fed has been “targeting” 2.0% inflation, and failing. So since in the Fed’s eyes inflation continues to not be an issue, how long until the Fed proceeds to target NGDP, unanchors inflation expectations, and finally launches Bernanke’s helicopter as we speculated recently?
Broken down by components, the biggest drop in August prices took place in Utility gas services, the third consecutive month of declines, so once again it was the weather’s fault even though on a Y/Y basis the increase was the largest at 4.8%. Other components seeing deflation were Gasoline prices, Used Cars and Trucks, which dipped -0.1% and have now declined for 4 months in a row, also posting a -1.0% drop in prices Y/Y. On the other end, rising the most were Medical Care Services, which rose 0.7% in August, and 3.1% Y/Y. At least Obamacare is having a favorable impact on inflation, if nothing else.
Digging into the actual core and non-core components:
The food index increased 0.1 percent in August, the same increase as in July. The food at home index also rose 0.1 percent for the second straight month. The index for fruits and vegetables continued to rise, increasing 1.2 percent after a 1.5 percent advance in July. The index for meats, poultry, fish, and eggs rose for the third month in a row, increasing 0.6 percent. The index for dairy and related products turned up in August, increasing 0.4 percent after declining in each of the three previous months, and the index for cereals and bakery products rose 0.3 percent in August after declining 0.3 percent in July. In contrast to these increases, the index for other food at home fell 1.0 percent in August, its largest decline since 2002. The index for nonalcoholic beverages also declined in August, falling 0.1 percent. The food at home index has risen 1.0 percent over the last 12 months. Four of the six major grocery store food group indexes rose over the span, with the fruits and vegetables index posting the largest increase at 3.6 percent. The index for food away from home rose 0.2 percent in August and has increased 2.0 percent over the past year.
The energy index declined 0.3 percent in August after rising 0.2 percent in July. The gasoline index, which increased in June and July, declined 0.1 percent in August. (Before seasonal adjustment, gasoline prices fell 0.5 percent in August.) The electricity index also decreased 0.1 percent in August, its second decline in a row. The index for natural gas fell as well, declining 2.3 percent after a 2.8 percent decrease in July. Fuel oil was the only major energy component index to increase in August; it rose 1.2 percent after a 1.1 percent increase in July. Major energy components are mixed over the last 12 months. Despite the recent declines, the index for natural gas has increased 4.8 percent over the past year, while the electricity index has increased 2.8 percent. However, the gasoline index has declined 2.4 percent over the span, while the index for fuel oil is unchanged.
All items less food and energy
The index for all items less food and energy increased 0.1 percent in August after increasing 0.2 percent in each of the three previous months. The shelter index increased 0.2 percent, the same increase as in June and July, with the rent index increasing 0.4 percent and the index for owners’ equivalent rent rising 0.2 percent, but the index for lodging away from home falling 0.7 percent. The index for medical care increased 0.6 percent in August. The medical care services index rose 0.7 percent with the index for hospital services increasing 1.9 percent. The medical care commodities index rose 0.4 percent. Also rising in August were the indexes for personal care, which rose 0.3 percent, tobacco, which advanced 0.4 percent, and apparel, which increased 0.1 percent. The new vehicles index, which rose in June and July, was unchanged in August, while the recreation index was unchanged for the second straight month. The index for airline fares declined sharply in August, falling 3.1 percent. This was the third consecutive decline for the index, but it has still risen 1.5 percent over the past 12 months. The indexes for used cars and trucks and household furnishings and operations both declined slightly in August, falling 0.1 percent.
The index for all items less food and energy increased 1.8 percent for the 12 months ending August. The medical care index rose 2.3 percent over that span, with the index for medical care services up 3.1 percent and the medical care commodities index unchanged. The shelter index increased 2.4 percent, and the index for new vehicles rose 1.1 percent.