Consumer Price Index:Historical Releases/2023 July
Return to: Consumer Price Index | Historical Releases
Full Report: https://www.bls.gov/news.release/archives/cpi_08102023.htm
Publishing date: Aug 10 2023
Assessment by Magaly
Even though annual headline CPI is increasing as expected during the month of June and super core also showed an increase, is still encouraging to see some of the underlying numbers improving or moderating with month-over-month numbers staying at 0.2% for 2 consecutive months now.
Is also positive to see that shelter CPI is now over 90% of the increase in inflation since we know that shelter CPI will continue to moderate in the coming months, however, I remain cautious with this, as housing prices are reaching the peak once again, and that the moderation in CPI will most likely be more muted than originally expected. I have the opinion that housing and rent prices will eventually continue lower, but currently, they are on a trend higher, which should be monitored.
August headline CPI forecasts are already showing an additional annual increase next moth, due to the increase in energy prices, which should continue to put pressure on CPI as long as oil prices continue to increase or don't moderate.
The markets continue to price a pause in rates, and if that does not change, I think it will be the most likely outcome. Also probably imo the best outcome, because I don't think another hike is needed at this point.
However, at the same time, I think August CPI will be more important than the July print, and also the Jackson Hole Fed statements to determine September probabilities.
Key Takeaways from July CPI Numbers
- Super core CPI increased during the month, due to a m/m increase in most service sectors, with some exceptions. Transportation services continue to be the primary driver of this category, which increased again in July.
- Used cars CPI, which has been a significant contributor to goods inflation movements, decreased significantly again, in line with the recent decline in prices. New cars also show some moderation.
- Oil index as expected was going to increase due to the jump in oil price, however, gasoline CPI (bigger contributor) is expected to be hit until august if oil price dont decline.
- Shelter CPI has now 4 consecutive months of declines in the annual rate, and 2 consecutive months at only 0.4% increase . This moderation is expected to continue.
Fed Cleveland
| [1] | YoY Change | MoM Change | ||
|---|---|---|---|---|
| Month | CPI | Core CPI | CPI | Core CPI |
| Aug 2023 | 3.81 | 4.46 | 0.77 | 0.38 |
JP Morgan
| [2] | YoY Change | MoM Change |
|---|---|---|
| Month | CPI | CPI |
| Aug 2023 | 3.46 | 0.36 |
| Sep 2023 | 3.32 | 0.28 |
Summary
- U.S consumer price index(CPI) rose 0.2% in July, in-line with the estimate.
- Year-over-year, CPI rose 3.2% versus 3.3% estimate.
- Core CPI rose 0.2% in June, also in-line with the estimate.
- Year-over-year, core CPI grew by 4.7% versus 4.8% estimate.
Contributors
- The index for shelter was by far the largest contributor to the monthly all items increase, accounting for over 90 percent of the increase, with the index for motor vehicle insurance also contributing.
- The food index increased 0.2 percent in July after increasing 0.1 percent the previous month.
- The energy index rose 0.1 percent in July as the major energy component indexes were mixed.
- Indexes which increased in June include shelter, motor vehicle insurance, education, and recreation.
- The indexes for airline fares, used cars and trucks, medical care, and communication were among those that decreased over the month.
Categories watched by the FED
| Index | M/M | Y/Y | Prev. M/M | Prev. Y/Y |
|---|---|---|---|---|
| Core Goods | -0.3% | 0.8% | -0.1% | 1.3% |
| Core Services | 0.4% | 6.1% | 0.30% | 6.20% |
| Shelter | 0.4% | 7.7% | 0.40% | 7.8% |
| Services less shelter "super-core" | 0.2% | 4.1% | 0.00% | 4.01% |
CPI expectations
July 2023 headline CPI is expected to show increase during July 2023 compare to June 2023, but with a still modest m/m increase. The main reason for this increase is due to base effects, the significant jump in energy prices that occured during the month, however all other components that we follow also saw an increase in prices in July, with the exception of car prices.
Core prices are expected to remain unchanged.
Some developments during the month: (more details: Consumer Price Index)
- Wages are stil above historical averages and came higher than expected in July once again.Wage growth remains very sticky.
- Energy prices saw a significant increase in July, this will be the main reason for higher CPI headline readings in coming mothns, especially August.
- Food price index increase 1.3% m/m during July, but is still 11.8% lower than a year ago.
- Supply chain continue to be below the index’s historical average in July, but rebounded a bit during July.
- Housing prices recorded a 4th consecutive month of price increases, increasing 1.2% month-over-month in May of 2023 (-0.5% y/y). Rent prices also increased 0.3% m/m, but are now -0.7% y/y.
- Used Car prices continue to decrease July, but at a more modest pace (1.6% m/m). New car transaction prices also decline 0.7% m/m during July. Recent significant declines, should start to be more reflected in CPI.
The markets are pricing a pause in rates for the remaining of the year. [3]
Range:
- CPI: 3.1% - 3.5%
- Core CPI: 4.7% - 4.9%
| Escenario | Market reaction | Probability by Magaly |
| CPI below 3.1% | 4%+ rally | 5% |
| CPI between 3.1 - 3.2% | 2-3% Rally | 15% |
| CPI in line with expectations | Flat | 45% |
| CPI between 3.4% - 3.5% | 1-2% drop | 30% |
| CPI above 3.5% | 3% drop | 5% |
Consensus forecast
| Variable | Forecast | Previous | Actual | Market Reaction |
|---|---|---|---|---|
| Core CPI (MoM) | 0.2% | 0.2% | 0.2% | |
| Core CPI (YoY) | 4.7% | 4.8% | 4.7% | |
| CPI (MoM) | 0.2% | 0.2% | 0.2% | |
| CPI (YoY) | 3.3% | 3% | 3.2% |
FED Cleveland Forecast
| [4] | YoY Change | MoM Change | ||
|---|---|---|---|---|
| Month | CPI | Core CPI | CPI | Core CPI |
| July 2023 | 3.42 | 4.92 | 0.41 | 0.40 |
| Aug 2023 | 4.07 | 4.75 | 0.79 | 0.40 |
Individual Forecasts
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References
- ↑ https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting
- ↑ https://twitter.com/Mayhem4Markets/status/1689430038423232513/photo/1
- ↑ https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html
- ↑ https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting