The stock market liked the CPI report more than the bond market.
The CPI Rose 0.2 Percent in July
The BLS reports the CPI Rose 0.2 Percent in July, in line with the the Bloomberg Econoday consensus. Good and bad details are very mixed.
The BLS reports to a single decimal place. I calculate two decimal places.
CPI Month-Over-Month Percent Details
- All Items: 0.20
- All Items Except food and Energy: 0.32
- Food and Beverage: 0.05
- Food Away from Home: 0.28
- Food at Home: -0.12
- Shelter: 0.23
- Owners’ Equivalent Rent (OER): 0.28
- Rent of Primary Residence: 0.26
- Medical Care Services: 0.79
- Medical Care Commodities: 0.05
- Energy: -1.07
- Gasoline: -2.17
The Fed, when it looks at the CPI, looks at core CPI, all items except food and energy. That was a less than stellar 0.32 percent increase for the month.
But the Fed’s preferred ,measure of inflation is the PCE price index, out later this month.
The PCE overweighs medical care whereas the CPI overweighs shelter. Medical Care Services is a very hot 0.79 percent.
On this basis, I doubt the next PCE report will be any good.
I will cover food, in a second post.
For now, please make a mental note that food and beverage up 0.05 percent for July is weighted nonsense even if you believe food at home declined 0.12 percent.
CPI Year-Over-Year Percent Change
CPI Year-Over-Year Details
- All Items: 2.7
- All Items Except food and Energy: 3.1
- Food and Beverage: 2.8
- Food Away from Home: 3.9
- Food at Home: 2.2
- Shelter: 3.7
- Owners’ Equivalent Rent (OER): 4.1
- Rent of Primary Residence: 3.5
- Medical Care Services: 4.3
- Medical Care Commodities: 0.10
Problems for the Fed
The CPI year-over-year CPI was 2.4 percent in September of 2024, then 2.3 percent in April of 2025 but has generally been stubborn.
More importantly, year-over-year core CPI is up 0.2 percentage points in July to 3.1 percent.
That more than a full percentage point higher than the Fed wants to see. It was also higher than the Bloomberg consensus estimate of 3.0 percent for July.
Core CPI bottomed at 2.8 percent in April.
CPI Year-Over-Year Percent Change Medical Care
Medical Care is a big problem for the Fed. And It’s not one the Fed can do anything about (other than ignore it).
The BLS weighs medical care services at 6.750 percent of the CPI. Medical Care Commodities has a weight of 1.513 percent.
Thus medical care services is nearly 4.5 times as important as medical care commodities.
Month-over-month medical care services was up a whopping 0.79 percent. That is going to impact the PCE price index which overweighs medical care.
And the PCE price index is the Fed’s preferred measure of inflation.
The Stock Market vs the Bond Market Reaction
The major stock market indexes are up about 1 percent on this news as I type (10:50 AM Mountain).
The 30-year long bond yield is up 4 basis points to 4.883 percent.
The long bond thought thought as much of this report as I did, which is mediocre at best, and that’s a stretch.
CPI Totally Messed Up
The CPI is totally messed up as a measure of inflation.
I discussed very serious errors in Is Homeowners Insurance Understated in the CPI? Shop Around!
Please check that out. And later today I will prove the BLS food weights are total nonsense.
Stay tuned.
The Fed has now missed their 2% CPI target every month for over 4 and a half years. Their aim is pretty bad. But they are as unaccountable as the rest of those who people government.
My property tax just went up 25.5% y-o-y. How’s that for inflation? Our Uniparty County Commissioners feel untouchable apparently.
For the American worker the important part was that inflation was up.3% and earnings went up only .1%. Earnings fell relative to costs by ,2% ~ If you believe the numbers?…
If inflation will rise globalization might rebound.
Food prices stabilize, with a few exceptions
Grocery prices dipped 0.1% in July but are still 2.2% higher than a year ago.
Eggs, whose price spirals have come to symbolize inflation anxiety, fell 3.9 percent from June, after dropping 7.4% compared to May. But they’re still a steep 16.4% higher than a year ago.
A dozen large Grade A eggs, on average, cost $3.60 in June, down from $3.76 in June and $4.55 in May.
A real pain point: the price of coffee, which is 14.5% than a year ago.
Meat prices, especially beef, remain elevated: Ground beef is 11.5% higher than a year ago, and steaks are up 12.4%. According to the BLS, a pound of ground chuck now averages $6.34. Ham and pork chops both saw increases, while poultry prices remained flat compared to June.
The cost of eating out increased 0.3% from June and was 3.9% higher than a year ago.
When enough people will rise against pharma, the food and the healthcare industries, a new generation of doctors coming out of medical schools will offer healthier and cheaper solutions, following prof Seyfried guidelines.
In 2022, after covid, people reaching age 65 peaked at 185K/month for males and 165K/month for females. In 2025 their number is slightly beyond peak. Within a decade it will drop dramatically. Demand for highly skilled workers to replace them and to fill new onshore jobs will rise. Gen alpha (2011-2024) and the zoomers (1997 -2012) will be the winners.
185K/M females and 165K/M males.
Stable casino genius does his magic…
US layoffs surged in July to their highest level since the early months of the COVID-19 pandemic.
In July, there were 62,075 job cuts announced, according to a report by outplacement firm Challenger, Gray & Christmas. That’s a 29 percent jump from June and 140 percent higher than the 25,885 announced in July 2024.
The July figure is well above the post-pandemic average for the month (23,584 between 2021 and 2024) and slightly higher than the past decade’s July average of 60,398. It pushes the 2025 total to 806,383 layoffs—a 75 percent increase compared with the same period last year and already 6 percent higher than all of 2024. It’s the highest January-to-July figure since 2020, when pandemic shutdowns drove layoffs above 1.8 million.
Mish, I’d love you to do the math on this too to make sure I’m calculating it correctly. I plugged everything into my spreadsheet for Core CPI YoY. Obviously, we replaced last July with this July, so July 2024 would be the starting point and all the monthly changes in core CPI since August of last year through July this year would be the total YoY core CPI. My spreadsheet showed 2.94% and not the 3.1% the BLS is saying it is. I did the math by calculator too just to verify and came up with the same 2.94% (2.938% to be exact). Assuming that I’m doing the calculations correctly, the all items less food and energy is overstated by 0.2% points.
July core CPI 2024: 319.214
July core CPI 2025: 328.980
Core CPI inflation YoY: (328.980-319.214)/319.214 = 3.1%
the social security snapshot for July is out and shows 180k more socialists added to the system and it’s now costing over $130b/month. As that number continues to climb, so will inflation as free money handouts beget inflation no matter how you cut it.
https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/
This whole market is banking on fed cuts and as soon as they are done, inflation will explode again and Trump/GOP will own it all 100%.
No trump will blame biden and his followers will believe him.
Funny a few years ago when my mom was alive. I she was calling democrats obama and such socialist. I was like mom you know ss and medicare are socialized programs. Yeah bit no.
Anyway if you think about it. Most programs /tax credits/ deductions etc are socialized programs. Unless it a usage tax like gas.
Inflation figures are not any more accurate than were the unemployment numbers. If you compute your personal inflation numbers, I believe you will find the posted numbers are understated. Would not be surprised if trump didn’t had a hand in these numbers.
The restaurant thing I see here also but I wonder now if this is economics or the baby boomers turning over past peak ? Wine and Liquor sales are down , Cigar sales down traffic in vegas way down . . Churches membership in declines as are things like the shriners and elk lodges membership way down . These were the baby boomers life style but the generations behind don’t do these things near as much . order food takeout have it delivered instead of sitting down and being served . There is definitely a major shift taking place in lifestyles . May be a good topic for Mish to address in the future .
Bowling Alone book was written in 2000, which was based upon a 1995 essay. The local Moose Lodge still has a Friday evening fish fry.
I’m with the bond market.
I’m in N Dallas, a generally booming area. Speaking of food, I started noticing a restaurant apocolypse has occurred with closures – even of long term places – now vacant. They have been decimated.
And I saw the Nat’l Resteraunt Assoc is predicting record bad times BY the industry for the rest of the year.
They are truly being slaughtered. Low volumes – even on once popular places I noticed + high rent = toast
How is the restaurant industry in Addison doing? I visited there a few years ago and was astonished by how many restaurants there were. Wikipedia says Addison’s year-round population of 16K swells to 120K on a daily basis due to office workers. Its 200 restaurants make it the highest restaurant per-capita in the nation. I would imagine there’s been some recession in the business there, curious what you’ve observed.
If government stats become unreliable, other corners of the markets may help fill in the information gap. The long bond seems like the biggest anchor of it all. Treasury is moving to short term instrument auctions, I guess to trade in markets where it can manipulate prices. Reminds me of Bear Stearns.
I mean Bear Stearns, in the sense of short term financing, as a more fragile form of financing. I did not mean to imply Bear manipulated prices. I mean the US Gov is going to a less reliable and durable form of financing, hoping to manipulate the cost of its own credit downward in those markets.
That doesn’t make sense unless you believe rates are due to come down by a lot in the near future. Otherwise you want to lock in as long as possible (long bond).
Besides doesn’t the market decide what its going to buy and what it’s not? So maybe it’s the market that’s forcing the Treasury to sell more short term instruments.
We’ve been hearing nothing but people howling and screaming that Trump’s tariffs are going to reingite inflation any moment now. We’ve heard this for the last 6 months. The bottom line is that over Biden’s last six months in office, the CPI rose 1.8%. Over Trump’s first six months in office, the CPI has gone up 0.9%. Despite Trump’s tariffs, inflation is running at half the rate it was prior to Biden going to a nursing home and prices haven’t even gone up 1% according to the CPI report.
That’s because American companies are eating most of the tariff… for now.
Really? How about looking at the dramatic drop import prices since Trump’s tariffs Goldman Sachs showed yesterday. According to that data, exporters are eating the lion’s share of the tariffs and not importers. After six months of Trump’s tariff war on the world, if importers had been eating that cost, they would be passing it on six months into price increases.
Inflation doesn’t work that way. The upswing now is due to Biden. The distributed lag effect of monetary flows, the volume and velocity of money, is generally 2 years. Excluding tariff effects money flows peak in September, reported in October, another market inflection point.
I don’t give a crap about that in my very simple comparison. The rate of inflation in the CPI report after six months of Trump is half of what it was under Biden’s last six months. One can argue until the cows come home as to who is to blame. I’m simply making a comparison and no matter what, the data shows exactly what I shared regardless of who is to blame or who should be given credit.
So what your saying is the first two years of bidens inflation was trumps fault
Not sure where you are getting your numbers? Either you’re wrong or you should show us how.
June 2024 – December 2024 (six-month end of Biden’s term) had a change in CPI from 314.175 to 315.605 or a change of 0.5%.
January 2025 – July 2025 (six-month beginning of Trump’s term) had a change in CPI from 317.671 to 323.048 or a change of 1.7%.
https://www.bls.gov/cpi/data.htm
I’ve never considered January to be the first month of a president’s term. I haven’t done so since I started tracking data and paying attention back during George Bush senior. Biden was president through 2/3 of January, so as I’ve always done, I consider that Biden’s last month and February Trump’s first month. Feel free to call it Trump’s first full month if you care to. Looking at the data MoM CPI change from August to January and you get 1.8% and from February through July, you get 0.9%. It’s the same CPI data everyone else sees.
Trump is trashing Powell again with a threatened lawsuit over the building remodels and also taking him to task over keeping interest rates steady. I guess a fellow with 4 or more bankruptcies to his credit should know about not being able to estimate costs or follow a plan.
“Three Billion Dollars for a job that should have been a $50 Million Dollar fix up. Not good!” Statement by Trump about Powell.
If the Fed is a private organization, why are they not on the hook for their problem. Maybe they could quit paying interest on banks reserves deposits for starters to pay for their construction.
Trump threatens Fed Chair Powell with “major lawsuit”
Taco is only going to get worse. He wants the ceo of Goldman Sachs to fire one of their long-time economists for “mentioning” inflation and tariffs in the same sentence. When is this mad man going to be stopped?
If the Cheeto Pedo doesn’t like it, it may be the last one we see for a while. Looks like they are going to suspend job reporting… which is guess is better than lying about it?
https://bsky.app/profile/moreperfectunion.bsky.social/post/3lw7nisz5c226
China did that for a while.
Will Trump attack the BLS for bad inflation numbers like he did earlier this month with bad employment numbers? Will he force BLS to provide better numbers? Will fixed income buyers hesitate to purchase TIPs if they think Trump will inappropriately push CPI numbers down? There’s a TIPs auction later this month – will be interesting to see what the bid-to-cover ratio will be at that auction.
Better just ignore them until a better system is set up. Should take a few months but the old system was so outdated it was ridiculous. Everyone plus Mish agree on that at least. Hopefully the new guy will do a good job.
It takes a minute for a pudgy little hand to write the desired numbers. The next report will show employment up 1500%.
The TV shows are saying that most every economist thinks the new guy is grossly unqualified for the position.
The Ministry of Only Good Numbers for Trump will confirm your suspicions soon
Some of the goods prices are running hot in expected ways footwear being one example. An exception would be large appliances although I have a suspicion that one is due to tariff front running on inventory meeting head on with a consumer hesitant to make large purchases.
I guess we have to put off the inflation surge from the tariffs for another month.
Nothing here indicates that the Fed should cut rates, that’s for sure.
It’s going to be funny when they’re finally cut, but bond yields and mortgage rates go up.
It’s embarrassing for the USA to be led by such nitwits, people who know damn well there’s no reason for a cut, who are at the same time demanding on Trump’s behalf Powell’s head on a platter and four rate cuts on the side.
Will Powell bend the knee to Trump as so many others are doing?