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August 11, 2017 | CPI Weak, Prices of Autos, Lodging Away From Home Drop: Econoday Cheers Rising Medical and Apparel Prices

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

The CPI rose 0.1% in July vs an Econoday consensus estimate of 0.2%. The Econoday Keynesian parrot does not like falling auto prices but is happy about rising medical prices.

Consumer prices remain very soft, failing to match what were modest Econoday expectations for July. Total prices edged 1 tenth higher in July as did the core (less food & energy) which are both no better than the low estimates. Year-on-year rates are also at the low estimates, at 1.7 percent each. Moderation in housing costs remains a major disinflationary force, inching only 0.1 percent higher for a yearly 2.8 percent which is down 2 tenths from June. And wireless services, in keeping with the telecom revolution, continue to move lower, falling 0.3 percent on the month for a yearly decline of 13.3 percent.

Vehicle sales have been weak this year and it’s being reflected in prices which fell 0.5 percent in the month. Lodging away from home is another major negative in the July report, falling a record 4.2 percent as motels and hotels cut prices. On the plus side, apparel prices, which had been on a long negative streak, rose 0.3 percent though the year-on-year rate remains in the negative camp at minus 0.4 percent. Medical care is a plus in the report, rising 0.4 percent for the second straight month with the year-on-year rate, however, edging lower to 2.6 percent. Energy prices are a negative in the report, at minus 0.1 percent, offset by a 0.2 percent rise for food.

Is the dip in inflation the result of one-time effects that will soon pass? Or is it the result of weak wages and general global disinflation? Lack of inflation remains the central trouble in the Federal Reserve’s policy efforts. Today’s results will not be improving expectations for the beginning of balance-sheet unwinding at the September FOMC.

CPI-U Urban Consumers

CPI Details

  • Since March, the CPI is slightly negative
  • Since March, the CPI excluding food and energy is growing about 1% annualized
  • New vehicle prices are down for the 5th month
  • Used vehicle prices are down for the 6th month, falling every month this year
  • Medical care commodities are up for the 3rd month
  • Medical care services are up for the second month

The Econoday parrot is the only one I am aware of cheering rising medical prices.

The parrot is always happy when consumers get less for their money, no matter what the category.

Related Articles

  1. Central Banks Puzzled as Global Inflation Hits Lowest Level Since 2009: Solving the Puzzle
  2. Oh that “Elusive” Inflation!
  3. Producer Prices Unexpectedly Decline

Searching for Inflation (But Looking the Wrong Way)

New York Fed President William Dudley says inflation is “elusive”. For discussion, please see link number 2 above.

Mike “Mish” Shedlock

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August 11th, 2017

Posted In: Mish Talk

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