Consumer Prices Sedate in June
- The Consumer Price Index for June increased by 0.1 percent.
- Initial Claims for Unemployment Insurance fell by 18,000, to hit 214,000 for the week ending July 7.
The headline Consumer Price Index increased by 0.1 percent in June. The sedate gain in the CPI stands in contrast to the stronger 0.3 percent gain in the headline Producer Price Index for June. Over the previous 12 months, headline CPI is up noticeably, by 2.9 percent. Consumer food prices increased by 0.2 percent for the month. Energy prices eased by 0.3 percent after stronger gains in April and May. We expect energy to exert a moderate push on the CPI in July. According to AAA, the national average unleaded gasoline price increased to $2.88 per gallon today, still below the $2.92 price from a month ago. The price for gasoline one year ago was $2.26 per gallon. Excluding food and energy, core CPI was up by 0.2 percent in June, and was up by 2.3 percent over the previous 12 months. We see in June that stronger producer prices are not yet pushing hard on consumer prices. Increasing import tariffs, energy, and tight labor market conditions are all on the plus side of the inflation equation this year. However, deflationary forces are still an important part of the national and global economy. We expect to see more pressure on both upstream and downstream prices through year end, motivating the Federal Reserve to increase the fed funds rate 25 basis points two more times this year, once in September and once in December, for a total of four rate hikes in 2018. According to the CME Group, the implied odds of a fourth fed funds rate hike on December 19 have increased to about 55 percent.
Initial claims for unemployment insurance fell by 18,000, to hit 214,000 for the week ending July 7. Continuing claims fell by 3,000, to hit 1,739,000 for the week ending June 30. Labor market indicators continue to show strong conditions, with no signs of faltering.
Market Reaction: U.S. equity markets opened with gains. The 10-Year Treasury bond yield is up to 2.86 percent. NYMEX crude oil is down to $69.55/barrel. Natural gas futures are down to $2.77/mmbtu.
For a PDF version of this report, click here: June 2018 Consumer Price Index
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