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US Economic Perspectives:July CPI recap: Ongoing progress
UBS·2024-08-15 04:00

Investment Rating - The report indicates a positive outlook on inflation trends, with a headline CPI increase of 0.15% in July and a 12-month inflation rate decreasing to 2.9%, the lowest since May 2021 [2][3]. Core Insights - The core CPI rose by 0.17% in July, leading to a 12-month core inflation rate of 3.2%, down from 3.3% in June, showing a significant decline from its peak in September 2022 [3][4]. - The report highlights that the increase in food prices away from home (21bp) aligns closely with pre-pandemic trends, indicating a potential stabilization in inflation [2][3]. - Owners' equivalent rent (OER) saw a notable increase of 36bp in July, suggesting that rent prices are a key factor in the current inflation landscape [4][18]. Summary by Sections Headline CPI - The headline CPI increased by 15 basis points in July, with a 12-month inflation rate of 2.9%, down from 3.0% in June [2]. - Energy prices remained stable, while food prices increased moderately, indicating a controlled inflation environment [2][3]. Core CPI - Core CPI rose by 17 basis points in July, with a 12-month inflation rate of 3.2%, reflecting a downward trend from previous months [3]. - The report notes that core inflation remains approximately 90 basis points above the Federal Open Market Committee's PCE inflation target [3]. Rent and Housing - Owners' equivalent rent increased by 36 basis points in July, which is still below the previous range of 42-47 basis points observed over the past ten months [4]. - The report emphasizes the importance of monitoring OER as it significantly influences core inflation [4][18]. Volatile Components - Core goods prices fell for the 13th time in 14 months, with used vehicle prices declining by 2.3%, indicating ongoing deflationary pressures in certain sectors [4][7]. - Core non-rent services saw a rise of 21 basis points, driven by increases in lodging and transportation services [4][6]. Future Projections - The report anticipates a moderate strengthening in CPI monthly changes through October, with core CPI projected to increase by 19 basis points in the next release [8]. - The 12-month core CPI inflation is expected to remain stable until the end of the year due to base effects [8].