Consumer Price growth slowed dramatically in August, missing expectations by the most since May 2017 (following the first monthly drop in PPI since Jan 2017) sparking a drop in the dollar and bond yields.
As once again the rise was dud to services prices…
The moderation in the core CPI reflected a 1.6% drop in volatile apparel prices.
Even so, the broader slowdown follows data showing a surprise drop in producer prices and suggests the path of inflation could be softer than expected.
At the same time, freight prices and rising wages, along with tariffs and counter- levies, may keep putting upward pressure on inflation. Additionally, the index for medical care fell 0.2% for a second month.
The shelter category, responsible for about one-third of the CPI, showed a 0.3 percent gain, in line with recent increases but slowed YoY, up 3.4% YoY, down from 3.5% and rent inflation rose 3.61% YoyY, down from 3.63%
Prices of new automobiles were unchanged, the first month without a gain since April, while used cars and trucks rose 0.4 percent.
Airfares rose 2.4% following a 2.7% advance in July, amid higher fuel prices, one of the biggest costs for airlines.
Gasoline prices increased 3% in August from the prior month, the most since April, and were up 20.3% Y/Y
All of which sparked a drop in the dollar…
and bond yields…
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