US Consumer Prices Rise More Than Expected In August From Services Not Tariffs

Following yesterday’s cooler-than-expected PPI (MoM deflation), expectations for this morning’s Consumer Price Inflation were for the further acceleration.

Headline CPI rose 0.4% MoM (hotter than the 0.3% expected, lifting prices up 2.9% YoY – the highest since January…

Source: Bloomberg

Core Services were the big driver of the increase, not driven by tariff pressures…

Source: Bloomberg

Core CPI rose 0.3% MoM as expected, lifting prices more than 3% YoY for the first time since February…

Source: Bloomberg

It looks like auto costs are starting to tick up again. New vehicles rose by 0.3% while used cars and trucks rose by 1.0%. But the real sting was in motor vehicle maintenance and repairs, which jumped by 2.4%. 

When we look at some import-exposed categories:

• Household furnishings are up 0.1% on the month, the least since March, and appliances within that category are up 0.4%, the most since June. A sort of mixed reading there.

• Apparel (clothing) is up 0.5%, the largest gain since February, so, an acceleration there.

• Video and audio products are up 0.5%, which is the smallest rise since May.

At least looking at these categories, there’s no overall broad story of acceleration in inflation pressures. 

Interesting, SuperCore CPI slowed in August to 3.52% YoY…

Source: Bloomberg

Comparing CPI to PPI shows that there is no margin pressure on firms and could suggest price pressures being passed through to end users…

Source: Bloomberg

Together with August PPI, the CPI report suggests that the Fed’s preferred inflation gauge, the core PCE deflator (due out Sept. 26) will edge up to 3.0% for August year over year – not enough to scare The Fed from its rate-cutting path.