CPI Inflation Fell in August

As expected, lower gas prices in August helped keep inflation growth subdued. Total CPI actually declined -.1% MoM in August and fell to +2% YoY from +2.4% in July. This was the first monthly decline in CPI this year. Core CPI, which excludes food and energy costs, rose +.2% MoM, as expected, but fell a tenth to +2.1% YoY(consensus +2.2%).

Energy prices fell -3.2% MoM in August (-2.5% YoY), the largest decline since last October, and gasoline prices fell an even larger -4.9% MoM (-6.4% YoY). Food prices continue to trend higher, rising +.4% MoM (+4.2% YoY). Medical care costs continue to rise faster than the general inflation rate, rising +.5% MoM (+4.5% YoY). Clothing prices gave up last months gain, falling -.5% MoM after rising +.4% MoM in July. Auto prices rose +.1% MoM, while all vehicle costs rose +.3% MoM (-1.4% YoY). Personal computers remain the deflationary winner, falling -10.2% YoY. Approximately 60% of the CPI covers services.

General housing inflation was unchanged in August, but owners' equivalent rent continued to grow at +.2% MoM (+3% YoY), its pace for the past few months.

The Fed remains concerned about inflation, even as headline CPI has eased in the past few months, because of the weakening dollar and rising commodity prices,
as evidenced by the record high prices for wheat, oil, and gold this month.