CPI Data as Expected

Headline CPI. which includes goods and services, rose +.1% MoM in July, the smallest gain in eight months. Over the past year, headline CPI fell to 2.4% YoY from 2.7% last month. Core prices, excluding food and energy, rose +.2% MoM, the same pace as June, and the annual pace also held steady at +2.2% YoY, the lowest level of the last year. It appears that a slowing economy is helping keep inflationary pressures in check.

Energy prices fell 1% MoM, the largest drop since January. Gasoline prices fell an even larger -1.8% YoY. In contrast, food prices continued to rise, but at a slower pace, growing +.3% MoM in July. As expected tenant rents and owners' equivalent rent both increased +.2% MoM. Medical costs recovered from their brief slump and are again growing faster at overall inflation, rising +.6% MoM. Auto prices were unchanged on the month, and apparel prices rose +.4%.

Year-to-date headline inflation has risen +4.5% annualized, a notable increase from the 2.5% gain for all of 2006. Energy has been the main driver, rising 21.3% YTD, followed by food which has risen +5.7% annualized YTD.