The parrot is always in favor of consumers getting less for their money.
For the first time since February, core consumer prices did not come in below expectations, hitting the consensus with a modest but useful 0.2 percent gain. Overall prices rose 1 tenth more than expectations at an energy-inflated 0.4 percent.
Looking first at core readings, housing, which is the report’s dominant component, has been moderating but picked back up in August to a 0.4 percent gain. Within housing, lodging away from home reversed July’s unusual plunge with a 4.4 percent surge while owners’ equivalent rent rose 0.3 percent. Wireless telephone services have been very weak this year but contraction eased in August, to only a 0.1 percent decline. Prices for new vehicles were flat, used vehicles dipped 0.2 percent, while transportation services, reflecting a 1.0 percent jump in insurance, rose 0.4 percent. When including motor fuel, transportation costs rose a very sharp 1.4 percent.
Energy costs, in part reflecting month-end pressure from Hurricane Harvey, jumped 2.8 percent with gasoline up 6.3 percent. Food was not a factor in August showing a 0.1 percent rise.
Year-on-year rates are mixed with overall prices up 2 tenths to 1.9 percent but the core holding flat at a subpar 1.7 percent. Despite lack of progress in the core, August results are not a disappointment and will definitely heat up support for the beginning of balance-sheet unwinding at next week’s FOMC.
Percent Changes in CPU
Both charts are from the BLS August 2017 CPI Report.
As expected in this corner, Hurricane Harvey had a little, if any impact this month. The BLS notes “Price collection late in the month was disrupted in 2 of the 87 collection areas.”
Mike “Mish” Shedlock