Core CPI Ran at Faster-Than-Expected Pace in August

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Bloomberg Sep 13, 2023 12:03 · 7067 Views

The so-called core consumer price index advanced 0.3% from July, the first acceleration in six months, Bureau of Labor Statistics data showed. Mike McKee reports on "Bloomberg Surveillance."

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Transcript

  • 00:00 Well, I said that economists were pretty good at forecasting and they were pretty good at forecasting this time, except for the core.
  • 00:06 There
  • 00:06 it comes in a little hotter at 3/10 on the month, which pushes the year over year core to 4.3.
  • 00:14 Still what had been forecast, the headline is up 066 tenths of 8%
  • 00:19 and that is what was forecast.
  • 00:21 And so the
  • 00:22 year over year number rises to 3.7% from 3.2, that's a tick higher.
  • 00:27 So it looks like perhaps that 03 was a revised up number.
  • 00:33 Let's take a look at some of the
  • 00:35 categories here.
  • 00:36 Food prices
  • 00:37 up only 2/10, so no real change there.
  • 00:40 But we get a big jump in energy prices.
  • 00:42 Gasoline up
  • 00:43 10 1/2%, no surprise.
  • 00:46 I don't think anybody, but it definitely has a weight on this index.
  • 00:50 Used cars and trucks fall again, 1.2%.
  • 00:55 They're down 6.6% for the year.
  • 00:57 So that puts pressure on the other direction.
  • 01:00 And then of course,
  • 01:01 services,
  • 01:02 less energy services
  • 01:04 up 04, but that includes a 3/10 gain in shelter.
  • 01:08 So
  • 01:10 let's see what the markets are doing.
  • 01:11 I'll get you some more numbers here in just a second.
  • 01:13 Mike, you've had time to take a second look.
  • 01:15 What stands out for you now?
  • 01:17 Well, we were talking about airfares before the numbers came out and airfares did rise 4.9% during the month, so that is important.
  • 01:24 Now breaking down the housing numbers,
  • 01:26 we see a shelter as I mentioned had been up 3/10 of 8%, owners equivalent rent
  • 01:32 up 4/10 of 8%, but rent of a primary residence
  • 01:36 up 5/10.
  • 01:38 That's a rise from the prior month of a 4/10 gain.
  • 01:42 So it does suggest that there is an issue with a housing still not coming down the way that the
  • 01:49 Fed would like to see it.
  • 01:51 Overall, this is probably neutral for the Fed and we can talk about the idea that perhaps
  • 01:57 we see retail sales have more of an impact, but hard to say at this point that anything will derail them from us
  • 02:03 to September hold.
  • 02:05 Does an elevated real yield figure into Fed calculus?
  • 02:09 It does.
  • 02:10 Over a longer period of time as inflation comes down, obviously
  • 02:13 real yields are going to rise.
  • 02:15 So the Fed has to keep an eye on that.
  • 02:17 They don't want to get any tighter than they feel they must be,
  • 02:21 but that's a long way away.
  • 02:23 And inflation on a headline basis for the CPI went up.
  • 02:26 Remember the PCE is the Fed's indicator
  • 02:29 and that has been moving at a slower pace than CPI.
  • 02:33 So the Fed is not
  • 02:34 overly concerned about where we are with real rates yet.
  • 02:37 What I find interesting, Mike, just in the Price Act
  • 02:39 of the markets is that the long end is also affected in tandem with the short end.
  • 02:44 It's sort of this feeling that this robustness of the US economy can continue even with rates where they are even despite all of the negative discussions.
  • 02:52 From your vantage point is that we got some of these upside surprises in the core element which was exactly where everyone was expecting to see the softness that everyone was hoping for.
  • 03:03 Well, it is obviously a bit surprising on a year over year basis.
  • 03:07 Base effects mean that we don't lose any ground.
  • 03:11 We see the the the core year over year come down some,
  • 03:14 but the services prices and we have to dig into that even further.
  • 03:18 The services prices are going to be a concern for the Fed.
  • 03:21 Now one of the things that we had seen
  • 03:23 in the past is that
  • 03:26 commissions on Wall Street
  • 03:27 had gone
  • 03:29 into the CPI and the PCE
  • 03:31 and pushed up that services X housing number.
  • 03:34 And
  • 03:35 I haven't gotten that far into the data yet, but that's something to look for as well.