Consumer Price Index:Historical Releases/2023 June

Return to: Consumer Price Index | Historical Releases

Full Report: https://www.bls.gov/news.release/archives/cpi_07122023.htm

Publishing date: July 12 2023

Assessment by Magaly

CPI Different Scenarios

June CPI saw a very positive surprise, coming better than expected. Its especially positive to see that shelter CPI accounts now for more than 70% of the monthly increase in CPI, because we expect this number to continue going lower in coming months, CPI should come lower with it or at least stabilize, unless a spike in other components.

However, June numbers were already expected to be positive, and it did not change the market pricing of another hike. Second half of 2023 will be more to imporant to determine the FED path going forward , as we can see in the Bank of America image, even if it stays at 0.2% m/m in headline CPI, we will still have an increase in CPI to almost 4% at year end. So, we will need to see additional disinflation going forward to continue in a declining trend. If not we will actually see inflation increasing again after July, the FED Cleveland is already forecasting July CPI higher than June.

After June CPI numbers, the probability of a hike in July stayed the same, but a second hike after July is now more in question. After July, we will have next meeting until september, and June CPI will probably be already irrelevant for that decision.

Key Takeaways from June CPI numbers:

• Shelter CPI starts to reflect the lags, and its rate of inflation has started to come down . But, we have to remain cautious with shelter CPI, as long as housing prices continue to increase.
• Used car CPI decrease again in June, but the big decline in June used car prices will be reflected until coming months. Which will put additional presuare to the downside.
• Transportation continues to be very volatile month by month, this month saw an decrease again, but will need to see consistent declines to improve, since its y/y contribution continues to be significant.
• Energy is having a very negative contribution on headline CPI due to the comps, which will be significant lower after June. Energy has been very volatile, and could be a key component going forward. June energy CPI actually increase m/m, and in July we are already seeing at spike in oil prices.

Outlook

Fed Cleveland

	YoY Change		MoM Change
Month	CPI	Core CPI	CPI	Core CPI
July 2023	3.35	4.92	0.34	0.40

Goldman Sachs

	DEC 2023	DEC 2024
Headline	3.30%	2.90%
Core	3.80%	3.00%

Summary

https://twitter.com/charliebilello/status/1679139333566078980

• U.S consumer price index(CPI) rose 0.2% in June, below the 0.3% estimate.
• Year-over-year, CPI rose 3% versus 3.1% estimate.
• Core CPI rose 0.2% in June, also below the expected 0.3%.
• Year-over-year, core CPI grew by 4.8% versus 5% estimate.
• Shelter index was responsible for over 70% of headline CPI increase, having rose 7.8% year-over-year and 0.4% month-over-month.
• Shelter accounts for about one-third of the weighing in the CPI.

Biggest Contributors

https://twitter.com/AvidCommentator/status/1679110956415324161/photo/1

• The index for shelter was the largest contributor to the monthly all items increase, accounting for over 70 percent of the increase, with a 0.4% month-over-month.
• Motor vehicle insurance, increased 1.7, also had a considerable contribution.
• Index for apparel which increased 0.3 percent. The indexes for recreation and personal care also increased in June. But having much lower contributions
• Several indexes declined in June, led by the airline fares index, which fell 8.1 percent over the month following declines in April and May. The index for communication fell 0.5 percent over the month. The household furnishings and operations index fell 0.1 percent over the month, after declining 0.6 percent in May. The index for new vehicles was unchanged in June.

Categories watched by the FED

https://twitter.com/KathyJones/status/1679109356842029058

Index	M/M	Y/Y
Core Goods	-0.1%	1.3%
Core Services	0.30%	6.20%
Shelter	0.40%	7.8%
Services less shelter "super-core"	0.00%	4.01%

https://twitter.com/joebrusuelas/status/1679109650103533573/photo/1

CPI expectations

June 2023 headline CPI is expected to continue lower, declining from 4.0% to 3.1% , comps from June 2022 continue to be very high contibuting to this big move, but after July they will start to decrease significantly.

Core prices are expected to continue in the 5%+ range, and well above the FED targe.

Some developments during the month: (more details: Consumer Price Index)

• Wages are stil above historical averages and came higher than expected in June, matching May increase. Wage growth remains sticky.
• Energy prices were mixed during June, however, due to the large increases in energy in 2022, we will probably still see a significant decline in y/y energy CPI.
• Food prices was down 1.4% percent in June, and 23.4% since its peak. Lower food CPI continue to be expected in coming months.
• Supply chain continue to be below the index’s historical average in June.
• Housing prices recorded a third consecutive month of price increases, increasing 1.7% month-over-month in April of 2023. This data could suggest that cooling in shelter CPI could not be permanent or volatile.
• Used Car decreased 4.2% m/m, among the largest declines in history, this will be reflected in CPI in coming months due to the lags.

The markets are now pricing a hike in July meeting, with 92% probability. There are no more hikes priced for 2023, and no cuts either.

Range:

• CPI: 3.0% - 3.3%
• Core CPI: 4.9% - 5.3%

Escenario	Market reaction	Probability by Magaly
CPI below 2.9%	4%+ rally	10%
CPI between 2.9 - 3.0%	1-2% Rally	25%
CPI in line with expectations	Flat	45%
CPI between 3.2% - 3.3%	2-3% drop	25%
CPI above 3.3%	4% drop	5%

Consensus forecast

Variable	Forecast	Previous	Actual	Market Reaction
Core CPI (MoM)	0.30%	0.40%	0.2%	0.74%
Core CPI (YoY)	5.00%	5.30%	4.8%
CPI (MoM)	0.30%	0.10%	0.2%
CPI (YoY)	3.1%	4.0%	3%

FED Cleveland Forecast

	YoY Change		MoM Change
Month	CPI	Core CPI	CPI	Core CPI
June 2023	3.22	5.11	0.42	0.43
July 2023	3.61	5.22	0.34	0.42

Analyst

• Goldman Sachs expects a 0.23% increase in core that lowers the YoY rate to 4.93% (vs 5.3% in May) and a 0.25% increase in headline CPI that lowers the year-over-year rate to 3.08% (vs 4.0% in May).
• UBS: Core +0.19% (+4.9% YoY), headline +0.18% (+3.0% YoY)
• Citi: Core +0.26% (+5.0% YoY), headline +0.2% (+3.0% YoY)
• Morgan Stanley: Core +0.27% (+5.0% YoY), headline +0.29% (+3.1% YoY)
• BofA: Core +0.29% (+5.0% YoY), headline +0.27% (+3.1% YoY)
• Barclays: Core +0.3% (+5.0% YoY), headline +0.25% (+3.1% YoY)
• JMP: "we estimate that core CPI rose 0.3% in June (0.28% to two decimals). If realized, this would be the first time in six consecutive months that the increase in core prices wasn’t at least 0.4%, and the year-ago pace would slip to 5.0% from 5.3% in May"