US CPI gains slow further in June
By Alexander Bueso
Date: Wednesday 12 Jul 2023
(Sharecast News) - Cost of living increases in the States continued to ebb last month, including at the so-called 'core' level.
According to the U.S. Department of Labor, in seasonally adjusted terms the country's Consumer Price Index rose by 0.2% month-on-month (consensus: 0.3%).
That saw the year-on-year rate of increase in headline CPI slip to 3.0% (consensus: 3.1%).
More positive yet was the 0.2% rise on the month at the core level (consensus: 0.3%), which excludes food and energy prices, given the Federal Reserve's concerns about stickiness in such prices.
The annual rate of increase in core CPI slipped to 4.8% (consensus: 5.0%).
And when rounded to two decimal places core CPI was up by just 0.15% - the smallest gain since 2021, Ian Shepherdson, chief economist at Pantheon Macroeconomics pointed out.
Used car prices exerted a large drag, dropping by 0.5% versus May, following a 4.4% jump during the previous month.
Shelter prices meanwhile rose by 0.4% on the month, which was down from a 0.6% gain during the month before.
Back at the headline level, food prices were up by 0.1% on the month and those for energy by 0.6%.
Shepherdson emphasised that "core inflation is falling fast, with more to come".
Used car prices were set to continue declining as were those for house rents, he explained.
Prices for core services excluding rents were unchanged in June, but decelerated to an annualised clip of 2.9% over the three months to June, from 4.8% for the quarter ending in March.
And a further slowdown was anticipated across the back half of 2023.
In a nutshell, core CPI gains nearer 0.1% in July and August were "decent bets".
Hence "the Fed will find it much harder to explain both to the public and the markets why they would need to raise rates again, especially if payroll growth continues to moderate, as we expect."
The Fed had painted itself into a corner, Ryan Sweet, chief US economist at Oxford Economics chimed in.
Wednesday's CPI print might give it more time to reflect on whether more hikes, after an expected move later in July, were needed.
Nonetheless, the consultancy's nominal wage tracker remained "well above" the level consistent with the U.S. central bank's inflation target.
That led him to the conclusion that "the Fed may continue to strike a hawkish tone until the labor market softens."
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