Boockvar Tackles the CPI
The following is from Peter Boockvar:
The consumer inflation rundown
The July CPI rose .1% headline and .2% core, exactly as predicted with y/o/y gains of 3.4% and 2.5% vs 3.5% and 2.6% in the month before.
I’m a bit confused though with the energy calculation. The BLS said gasoline prices fell 2.9% m/o/m. According to AAA, gasoline rose by 6.6% in July while diesel was up by 11%. With respect to electricity prices and of course now a big focus, they were up by .1% m/o/m and 4.2% y/o/y.
Food prices were higher by .1% m/o/m and 3% y/o/y with again ‘food away from home’ seeing the bigger price gains. They rose .3% m/o/m and 3.4% y/o/y. ‘Food at home’ prices were down .1% m/o/m though up 2.7% y/o/y. The price of meats in particular finally fell m/o/m but still up 5.4% y/o/y. Egg prices on the other hand are down about 25% y/o/y.
Services inflation ex energy was up .2% m/o/m and 3% y/o/y and continues to be the main driver of inflation, still. Owners’ Equivalent Rent, the biggest component, saw prices up by .3% m/o/m and 3.2% y/o/y. Rent of Primary Residence was up .3% m/o/m too and by 2.9% y/o/y, getting close to the on the ground reality where coastal rental gains are offsetting the softness in the sunbelt.
Medical care costs rebounded by .4% m/o/m and were up by 1.7% y/o/y even as the ‘health insurance’ category is no where close to calculating the actual costs because of its methodology. The BLS said ‘health insurance’ prices fell .2% m/o/m and down by 8% y/o/y. Huh?
Airline fares continue to jump, up another 2.2% in the month alone and by 25.5% y/o/y. Offsetting this was the cost of arrival with hotel prices down 3.3% m/o/m but still up 2.8% y/o/y. The cost of fixing a vehicle continues to see inflation with prices up by .6% m/o/m and 6.6% y/o/y. Auto insurance prices continued to cool, down .3% m/o/m and by 4.5% y/o/y.
On the core goods side, prices were up by .2% m/o/m and .8% y/o/y. Used car prices were a factor, up by .4% m/o/m, though down 1.9% y/o/y. New car prices were up .1% m/o/m and by .5% y/o/y. Apparel costs were up .1% m/o/m and 3.9% y/o/y as we approach back to school. The prices of home related stuff rose .1% m/o/m and .8% y/o/y.
Thanks to ever rising memory and component costs, ‘personal computers and peripheral equipment’ saw prices jump by 3.5% in the month, and up by 3.9% y/o/y. For ‘computer software’, prices were higher by .5% m/o/m and by 21.2% y/o/y.
Bottom line, no real surprises and bond yields didn’t move much in response. Neither did inflation breakevens, which remain subdued. I’ll repeat my belief again that tomorrow’s PPI, combined with CPI, will give the more complete inflation picture because just because some inflation can’t be passed on to the consumer doesn’t mean it disappeared.
Positions: None.
