Consumer Price Index Rises Slightly

Price pressures evident the last two months down the supply chain are not yet appearing in consumer prices where the CPI rose only 0.2 percent in June for a weak year-on-year rate that is not going in the right direction, at plus 1.0 percent vs 1.1 percent in the prior three months. Ex-food & gas, consumer inflation also rose 0.2 percent with this year-on-year rate moving 1 tenth higher to a respectable but still soft 2.3 percent.

Strength in service prices was a highlight of yesterday's producer price report and is also a highlight in this report, up 0.3 percent for the third straight month. This gain helps offset weakness in commodity prices which rose only 0.1 percent. Lodging away from home shows an outsized gain for a second month, at plus 0.6 vs May's 0.7 percent, though housing overall is flat at only plus 0.2 percent. Transportation rose 0.6 percent in the month with medical care up 0.4 percent, gains offset by a 0.1 percent decline for food and a 0.4 percent dip for apparel.

Energy prices rose 1.3 percent in the month and follow similar gains in the four prior months, pressure reflecting the pass through from the manufacturing and wholesale sectors. For consumer prices in general, however, this effect is still limited, yet today's report does show some signs of new life and may boost confidence among policy makers that the inflation picture is improving.

Recent History Of This Indicator:
Despite gains in producer prices and import prices, consumer prices failed to show much pressure in May. But a little more pressure is expected for June with the consensus at plus 0.3 percent overall but the core at plus 0.2 percent again (less food & energy). Year-on-year rates have been not been moving higher, up about 1 percent overall and just over 2 percent for the core. Medical care has been showing the most pressure with a 3 percent rate with housing right behind at 2-1/2 percent. Food and apparel prices are under 1 percent each with energy prices, despite ongoing improvement, still down 10 percent on the year.