US Macro Updates

12th Aug 2026 NEW

Key takeaway: The Consumer Price Index for All Urban Consumers, known as CPI-U, is the most closely watched inflation gauge in the United States, covering the spending habits of roughly 93% of the American population across a broad basket of goods and services. Over the past one to two years, consumer prices have followed a gradual disinflationary path after the elevated inflation surge of the early-to-mid 2020s, with monthly readings increasingly settling into modest, low single-digit territory. The July 2026 reading of 332.81, reflecting a minimal 0.07% month-over-month gain, represents one of the softest monthly prints in recent memory and signals that the disinflationary trend remains firmly intact. On an annualized basis, a pace of 0.07% monthly growth translates to well below the Federal Reserve’s 2% annual inflation target, suggesting price pressures have not only cooled but may be running under the Fed’s desired level. For the Federal Reserve, a sustained run of readings this benign increases the probability of rate cuts or at minimum reinforces the case for maintaining an accommodative policy stance to prevent inflation from falling too far below target. From a real wage perspective, subdued inflation is a positive development for workers, as nominal wage gains are more likely to translate into meaningful improvements in purchasing power. Consumers broadly benefit from price stability at these levels, though policymakers will remain watchful that inflation does not undershoot in a way that signals broader economic weakness.

CPI-U increased 0.07% in Jul to 332.81.

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14th Jul 2026 NEW

Key takeaway: The Consumer Price Index for All Urban Consumers, known as the CPI-U, is the most widely followed measure of inflation in the United States, tracking price changes across a broad basket of goods and services purchased by urban households and serving as a key benchmark for Federal Reserve policy, wage negotiations, and cost-of-living adjustments. Over the past one to two years, consumer prices had been on a gradual cooling trajectory following the elevated inflation surge of the early 2020s, with the pace of price increases steadily moderating toward more historically normal levels. However, escalating tensions in the Straits of Hormuz had turned the trend of softening inflation on its head. The rise in energy prices filtered through into a rise in the headline CPI as well as a rise in the core measure which strips out food and energy inflation. Subsequently, the ceasefire caused energy prices to plummet to pre-war levels. The June 2026 reading of 332.57 marks a monthly decline of 0.42%, a notable move that suggests deflationary pressure has entered the picture, which could indicate demand softening, easing supply chain conditions, or falling commodity prices feeding through to consumer costs. A monthly decline of this magnitude, if sustained, would place the annualized inflation trend comfortably below the Federal Reserve’s 2% target and could even raise concerns about undershooting that target. For the Fed, this data strengthens the case for holding rates steady or potentially pivoting toward rate cuts, as policymakers will weigh the risk of overtightening against a backdrop of cooling prices. On the consumer side, falling prices offer a short-term boost to purchasing power, meaning households can stretch their dollars further, though persistent deflation can also signal weakening economic demand. Real wages, which measure earnings adjusted for inflation, would see an improvement from this reading, providing some relief to workers whose nominal pay gains had previously been outpaced by rising prices. At the same time, it is equally important to note that both the headline and the core measure remain above the Fed’s target, as they have been for the past 5 years. Further escalations in the Middle East would cause energy inflation to rise and filter through into broader inflation in the economy. The Fed has this view in its sights as the new Chairman seeks to further cement his inflation fighting credibility

CPI-U decreased 0.42% in Jun to 332.57.

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10th Jun 2026 NEW

Key takeaway: The Consumer Price Index for All Urban Consumers, known as the CPI-U, is the most widely followed measure of inflation in the United States, tracking price changes across a broad basket of goods and services that reflects the spending habits of roughly 93% of the American population. Over the past two years, consumer prices have gradually retreated from the multi-decade highs seen in 2022 and 2023, though progress toward the Federal Reserve’s 2% annual target has remained uneven and at times frustratingly slow. The May 2026 reading of 333.98, reflecting a monthly gain of 0.47%, signals that inflationary pressures have not fully dissipated and that the path back to the Fed’s preferred pace of price growth remains incomplete. On an annualized basis, a monthly increase of this magnitude runs well above the 2% target, which will likely give Federal Reserve policymakers reason to maintain a cautious stance on any potential interest rate reductions. On a year over year basis headline CPI printed 4.2%. On the other hand, the core CPI measure – although higher than the low at the start of the year – remains relatively contained. The y-o-y Core CPI printed at 2.9%. Nonetheless, persistent inflation complicates the Fed’s balancing act, as cutting rates prematurely risks reigniting broader price pressures while holding rates elevated for too long weighs on economic growth and employment. For everyday Americans, continued price increases erode real wages when nominal pay gains fail to keep pace, squeezing household budgets particularly for lower- and middle-income consumers who spend a greater share of income on necessities. Until monthly CPI readings consistently align with the Fed’s 2% annual objective, consumer purchasing power will remain under pressure and the timeline for meaningful monetary policy easing stays uncertain.

CPI-U increased 0.47% in May to 333.98.

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12th May 2026 NEW

Key takeaway: The Consumer Price Index for All Urban Consumers (CPI-U) is the most widely followed measure of inflation in the United States, tracking price changes across a broad basket of goods and services and serving as a critical input for Federal Reserve policy, wage negotiations, and government benefit adjustments. Over the past 12 to 24 months, consumer prices have remained persistently elevated relative to the Fed’s 2% annual target, reflecting ongoing pressures in services, shelter, and select goods categories even as some earlier supply-chain-driven inflation has moderated. The April 2026 reading of 332.41 represents a monthly gain of 0.64%, a pace that, if sustained, would translate to an annualized inflation rate well above the Fed’s comfort zone and signals that the disinflation trend may be stalling or reversing. This reading is likely to give Federal Reserve policymakers pause, reinforcing a cautious stance on any near-term interest rate cuts and potentially reigniting discussions about whether the current policy rate remains sufficiently restrictive. For consumers, a monthly increase of this magnitude continues to erode real purchasing power, meaning that wage growth must outpace price gains simply to maintain living standards. Workers in sectors where nominal wage growth is lagging will feel the squeeze most acutely, as each dollar stretches less far at the grocery store, gas station, and beyond. Overall, the April data underscores that the battle against inflation is not yet won and that both policymakers and households should brace for a prolonged period of price adjustment.

CPI-U increased 0.64% in Apr to 332.41.

CPI-U – April 2026: +0.64% (332.41)

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10th Apr 2026

Key takeaway: The BLS released the March 2026 CPI report on April 10, delivering a headline number dominated almost entirely by the Iran-war energy shock. The CPI-U rose 0.9% on a seasonally adjusted basis in March — the largest monthly gain in nearly four years — lifting the annual rate to 3.3%, up sharply from 2.4% in February and the highest since April 2024. The energy index surged 10.9%, led by a 21.2% jump in gasoline prices that alone accounted for nearly three-quarters of the monthly all-items increase. Underneath the headline, however, the picture was considerably more benign: core prices — excluding food and energy — rose just 0.2% for the month and 2.6% year-on-year, both 0.1 percentage point below forecast, indicating that underlying inflation pressures remain relatively contained. Food was unchanged on the month, while medical care, personal care, and used cars and trucks all fell. The shelter index rose a modest 0.3%. The surge in the CPI meant real earnings fell 0.6% for the month, as average hourly earnings rose just 0.2%. Fed officials are likely to look through the March spike given that a ceasefire between the US and Iran has since established a tentative peace, though markets had already priced little chance of a rate cut through the rest of 2026, even as Fed officials at their March meeting indicated a tilt toward a modest reduction, with timing highly uncertain.

• CPI increased 0.9% m-o-m in Mar and 3.3% y-o-y (expected 3.4%)
• Core CPI increased 0.2% m-o-m in Mar and 2.6% y-o-y (expected 2.7%)

11th Mar 2026

Key takeaway: The latest release on CPI for the month of January is the 3rd clean and on-time read on inflation since the government shutdown at the start of October last year. Yet, due to the gaps in data collection for October and November, the overall data on inflation, especially 6 monthly annualized and y-o-y figures have gotten skewed to the downside. The BLS did release some CPI data for the months of October and November last month. However, due to lack of data collection during the shutdown, the CPI release for the months of October and November had a lot of gaps and was deemed to be not meaningful. The latest release showed headline CPU increased by 0.3% in February, following a 0.2% increase in January. On a year-over-year basis, consumer prices increased by 2.4%, unchanged from the annual rate recorded in the previous month. Meanwhile, core CPI, which excludes food and energy, increased by 0.2% during the month, while core prices were 2.5% higher than a year earlier. Shelter continues to drive the disinflationary trend in CPI with a monthly print of 0.2% and stands at 3.0% y-o-y. This trend will likely continue for the foreseeable future. Given Shelter comprises almost 45% of Core CPI, we can continue to expect continued downward prints on Core CPI in the near future. Interestingly, this differs from Core PCE – the Fed’s preferred measure – which has a lower weight of the Shelter component. Core goods and core services inflation was also very muted in the February print. This confirms the fact that inflation was indeed quite soft prior to the start of the Middle East war. However, the sharp increase in crude prices have the potential to disrupt the disinflationary trend and change equations for monetary policy going forward.

• CPI increased 0.3% m-o-m in Feb and 2.4% y-o-y (expected 2.4%)
• Core CPI increased 0.2% m-o-m in Feb and 2.5% y-o-y (expected 2.5%)

13th Feb 2026

Key takeaway: The latest release on CPI for the month of January is the 2nd clean and on-time read on inflation since the government shutdown at the start of October last year. Yet, due to the gaps in data collection for October and November, the overall data on inflation has gotten skewed to the downside. The BLS did release some CPI data for the months of October and November last month. However, due to lack of data collection during the shutdown, the CPI release for the months of October and November had a lot of gaps and was deemed to be not meaningful. The latest release shows headline CPI at 2.4% and Core CPI at 2.5%. The levels are mostly lower than the levels right before the government shutdown. However, that might be also due to the gaps in data from the shutdown. Core Services inflation at 3% also remains modest and much lower compared to recent history. Shelter inflation at 3.0% continues to decline. The latest print showed Shelter increased 0.2% m-o-m on the back of a similar increase in OER. Overall, the print was mostly perceived as weak and bearish with 10 year yields moving 4-6 basis points lower on account of the weaker than expected inflation.   

• CPI increased 0.2% m-o-m in Jan and 2.4% y-o-y (expected 2.5%)
• Core CPI increased 0.3% m-o-m in Jan and 2.5% y-o-y (expected 2.5%)

13th Jan 2026

Key takeaway: The latest release on CPI for the month of December is the first clean read on inflation since the start of the government shutdown at the start of October last year. The BLS did release some CPI data for the months of October and November last month. However, due to lack of data collection during the shutdown, the CPI release for the months of October and November had a lot of gaps and was deemed to be not meaningful. The latest release shows headline CPI at 2.7% and Core CPI at 2.6%. The levels are mostly unchanged from the levels right before the government shutdown. Core goods inflation remains mild at 1.4% y-o-y. Similarly, core Services inflation at 3% also remains modest and much lower compared to recent history. Shelter inflation at 3.2% continues to decline, though the latest month’s print was slightly higher than recent months. Overall, the print did not do much to influence both short term and long term rates. The Fed is unlikely to cut at its January meeting.   

• CPI increased 0.3% m-o-m in Dec and 2.7% y-o-y (expected 2.7%)
• Core CPI increased 0.2% m-o-m in Dec and 2.6% y-o-y (expected 2.7%)

18th Dec 2025

Key takeaway: (Delayed data due to government shutdown). The latest release on CPI shows combined data for the months of October and November. The government shutdown meant little data was collected for the month of September and some economists have been warning that the data gaps may affect the validity of the November data as well. Nonetheless, the November print is key, especially since the numbers were much softer than expectations. Headline CPI came in at 2.7% against expectations of 3.1% and Core CPI came in at 2.6% against expectations of 3.0%.  Slowdown in Shelter inflation once again contributed to the decline.  

• CPI increased 0.2% from Sep till Nov and 2.7% y-o-y (expected 3.1%)
• Core CPI increased 0.2% from Sep till Nov and 2.6% y-o-y (expected 3.0%)

24th Oct 2025

Key takeaway: Inflation data for the month of September is finally here, delayed as it may be due to the government shutdown. Headline CPI for the month of September increased from 2.9% to 3.0%. Core CPI on the other hand decreased from 3.1% to 3.0%. Both readings were slightly lower than consensus expectations. Core goods inflation was mostly flat at 1.5%. Market participants are watching this figure carefully especially since we had seen import sensitive goods inflation creeping up in the previous months. However, there has yet to be very large noticeable change in goods inflation from tariffs. New vehicles increased 0.2% m-o-m and used vehicles decreased 0.4% m-o-m. Core Services inflation, which excluded energy services, also remained steady at around 3.6% yo-y. The highlight of the latest CPI report though has been Shelter inflation. Shelter increased 0.2% m-o-m, one of the lowest readings in recent months.The key component of Owners equivalent rent increased only 0.1%, the smallest monthly increase since January 2021. Similarly the rent index also increased only 0.2% m-o-m. Shelter inflation has been falling over the past year and that has helped services inflation record lower prints. The Shelter component comprises 33% of the overall CPI. Market participants have long been expecting this component to reduce and accordingly bring down the overall CPI growth rate. The delayed but long expected decline in Shelter CPI is finally here. Given that house prices have mostly been flat or declining in most regions of the US, it is more than likely that Shelter component will remain either declining or subdued, maintaining an overall downward pressure on the CPI index. Core services ex housing also remained mostly steady at around 3.5%. In summary though the print all but confirms the Fed cutting rates by 25 bps next week and another 25 bps in December.  

• CPI increased 0.3% m-o-m (expected +0.4%) and 3.0% y-o-y (expected 3.1%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 3.0% y-o-y (expected 3.1%)

11th Sep 2025

Key takeaway: Headline CPI for the month of August increased from 2.7% to 2.9%. The print was in line with consensus expectations. Similarly, core CPI was also in line with consensus expectations, remaining steady at 3.1% as the previous month of July, Core goods inflation accelerated from 1.1% to 1.5%. Market participants are watching this figure carefully especially since we had seen import sensitive goods inflation creeping up in the previous months. New vehicles increased 0.3% m-o-m and used vehicles increased sharply at 1.0% m-o-m. Services inflation, on the other hand, remained steady at around 3.6% yo-y. Shelter increased 0.4, accelerating from the 0.2% seen in the previous month of July.The key component of Owners equivalent rent increased from 0.3% to 0.4%. Similarly lodging away from home also rose sharply from -1.0% to 2.3% m-o-m. Shelter inflation has been falling over the past year and that has helped services inflation record lower prints. However, if shelter inflation plateaus at around 4% y-o-y, it would be difficult to achieve further disinflation in the Services category, causing overall CPI to once again stagnate around the 3% mark. Core services ex housing had increased from approx 2.6% in April to approx. 3.5% in July and has remained around the same level in August. In summary though the print all but confirms the Fed cutting rates by 25 bps next week. 50 bps is difficult to justify with this data. 

• CPI increased 0.4% m-o-m (expected +0.3%) and 2.9% y-o-y (expected 2.9%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 3.1% y-o-y (expected 3.1%)

12th Aug 2025

Key takeaway: Another month, another inflation data print. Just like the previous month, the latest print for July had ammunition for both doves and hawks. Headline CPI remained steady at 2.7% from the previous month and was slightly lower than consensus expectations of 2.8%. However, the more important core CPI, which is supposedly reflective of underlying price pressures, printed 3.1% – higher than the 2.9% in June and also higher than the 3.0% consensus expectations. Market participants were mostly focused on goods inflation especially since we had seen import sensitive goods inflation increasing in the previous month of June. However, goods inflation had a relatively soft print with core goods increasing 0.2% m-o-m. New vehicles were unchanged at 0% m-o-m and used vehicles increased 0.5% m-o-m. Services inflation, on the other hand, was seen accelerating at a faster pace. Shelter increased only 0.2%, similar to the previous month of June and one of the lowest prints in recent history. However, despite soft data in core goods and shelter, other Services categories rose sharply. Core Services ex Housing, which was Chair Powell’s key metric a year back, increased substantially from the previous month driven by an increase in Medical Service and Transportation. Core services ex housing has increased from approx 2.6% in April to approx. 3.5% in July. Overall, the print had a equal amount of fodder for the doves as well as the hawks. While long term yields rose a bit in response and the Fed Fund futures market shows a greater probability of the Fed cutting rates by 25 bps at the September meeting.

• CPI increased 0.2% m-o-m (expected +0.2%) and 2.7% y-o-y (expected 2.8%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 3.1% y-o-y (expected 3.0%)

16th Jul 2025

Key takeaway: After four consecutive months of weak CPI prints, the market was bracing for a higher CPI print for June. Headline CPI increased from 2.4% to 2.7% and printed higher than consensus expectations of 2.6%. However, the more important core CPI, which is supposedly reflective of underlying price pressures, printed 2.9% – higher than the 2.8% in May but lower than the 3.0% consensus expectations. New and used vehicles, both printed negative m-o-m growth figures at -0.3% and -0.7%. Similarly, Shelter increased only 0.2%, one of the lowest prints in recent history with lodging away from home falling 2.9% in June. Core goods came in at 0.2% and Core Services printed 0.3% m-o-m. However, despite some soft number in the release, market participants perceived the print as hotter than expected. Some of the individual categories which are more import dependent rose significantly – a reflection of recent tariff increases. Core Services ex Housing, which was Chair Powell’s key metric a year back, increased substantially from the previous month driven by an increase in Medical Service inflation. Overall, the print had a equal amount of fodder for the doves as well as the hawks. While yields rose a bit in response and the Fed Fund futures market shows a greater probability of the Fed maintaining its position in the September meeting as well, there was enough ammunition for the doves as well to demonstrate that tariff fueled inflation has not meaningfully materialized yet.

• CPI increased 0.3% m-o-m (expected +0.3%) and 2.7% y-o-y (expected 2.6%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 2.9% y-o-y (expected 3.0%)

11th Jun 2025

Key takeaway: The CPI data print for the month of May was going to be especially important since it was the first full month’s data post the tariff announcements in April. The trend of softer than expected inflation prints continued in May as well. Headline CPI increased 0.1% m-o-m on a SA basis in May, lower than the +0.2% consensus expectations. Similarly, core CPI also came in at 0.1% compared to consensus expectations of +0.3%. That takes the annual numbers to 2.4% and 2.8% for Headline and Core. lower than consensus estimates. The first key point to note is that fears of an inflation surge from tariff increases has yet not materialized. However, it is too early to make a judgment on that as well. Amongst the various components of CPI, firstly Energy decreased 1.0% m-o-m which contributed to the overall soft headline number. New vehicles and used cars fell m-o-m as well when the expectation was that we might see an increase in prices. Private measures like the Manheim Index had risen in some of the recent months especially as buyers raced to purchase automobiles in the fear of higher tariffs later. Core goods inflation, which the Fed has highlighted as a specific data point that it is monitoring, was unchanged at 0.0%. Shelter inflation rose 0.3%, once again much lower compared to recent months and further evidence that this key component which comprises 1/3rd of the CPI is on its way down. The Index for owners equivalent rent increased 0.3%, lower than the 0.4% in the previous month. The Index for rent increased 0.2%. And the Index for lodging away from home fell 0.1% m-o-m. The Shelter component now stands at 3.9% y-o-y, markedly lower from the 6-7% range seen 3 years back. Lastly, for the fourth month in a row, there was a sharp deceleration in Core Services Ex Housing as well. While the measure remained around 2.7% y-o-y, monthly increases were soft once again. The 3 and 6 month annualized figures now sit at 0.5% and 2.5% respectively. Another notable component of today’s report was a sharp 2.7% drop in Airline fares on the back of the 5.3% and 2.8% declines in the previous 2 months. This needs to be viewed in conjunction with the latest announcements and press releases from the major airlines which have warned of severe softening in demand.     

• CPI increased 0.1% m-o-m (expected +0.2%) and 2.4% y-o-y (expected 2.5%)
• Core CPI increased 0.1% m-o-m (expected 0.3%) and 2.8% y-o-y (expected 2.9%)

13th May 2025

Key takeaway: The trend of softer than expected inflation prints continues with the latest CPI release for the month of April. Headline CPI increased 0.2% m-o-m on a SA basis in April, lower than the +0.3% consensus expectations. Similarly, core CPI also came in at 0.2% compared to consensus expectations of +0.3%. That takes the annual numbers to 2.3% and 2.8% for Headline and Core. lower than consensus estimates but mostly steady at last month’s levels. Amongst the various components of CPI, firstly Energy increased 0.7% m-o-m after having registered a sharp fall of 2.4% in March. Most Energy commodities (gasoline and fuel oil) recorded declines whereas Energy services like electricity and piped gas recorded increases. Core goods inflation, which the Fed has highlighted as a specific data point that it is monitoring, increased 0.1%. Used Cars were down 0.5% after having fallen 0.7% the previous month. Shelter inflation rose 0.3%, once again much lower compared to recent months and further evidence that this key component which comprises 1/3rd of the CPI is on its way down. The Index for owners equivalent rent increased 0.4%, the same as the previous month. The Index for rent also increased 0.3%. However, the Index for lodging away from home fell 0.1% m-o-m. Lastly, for the third month in a row, there was a sharp deceleration in Core Services Ex Housing as well. The measure declined from around 3.0% to 2.6% y-o-y. Another notable component of today’s report was a sharp 2.8% drop in Airline fares on the back of the 5.3% decline seen last month. This needs to be viewed in conjunction with the latest announcements and press releases from the major airlines which have warned of severe softening in demand. However, despite all the softer prints in the past 3 months, we also need to keep an eye on the other inflationary developments in the economy. The tariff related worries have abated, stock markets are back again close to all time highs and oil prices have come off recent lows.    

• CPI increased 0.2% m-o-m (expected +0.3%) and 2.3% y-o-y (expected 2.4%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 2.8% y-o-y (expected 2.8%)

10th Apr 2025

Key takeaway: Amidst the tariff madness, we have a super soft print on inflation. Headline CPI decreased 0.2% m-o-m on a SA basis in March, much lower than the +0.1% consensus expectations. Similarly, core CPI also came in at muted 0.1% compared to consensus expectations of 0.3%. That takes the annual numbers to 2.4% and 2.8% for Headline and Core, sharply lower compared to previous month. Almost all components of CPI were significantly lower on a m-o-m basis. Firstly, Energy was sharply lower with Gasoline falling 6.3% on the month. Core goods inflation, which the Fed has highlighted as a specific data point that it is monitoring, fell 0.1%. Used Cars were down a sharp 0.7%. Shelter inflation rose 0.2%, once again much lower compared to recent months and further evidence that this key component which comprises 1/rd of the CPI is on its way down. The Index for owners equivalent rent increased 0.4%, the same as the previous month. The Index for rent also increased 0.3%. However, the Index for lodging away from home fell significantly, 3.5% m-o-m. Lastly, for the second month in a row, there was a sharp deceleration in Core Services Ex Housing as well. The measure was mostly unchanged on a m-o-m basis. On a y-o-y basis, it came down from around 3.74% to 3.0%. The figure is likely to go down even further given higher base effects in 2024. Another notable component of today’s report was a sharp drop in Airline fares. This needs to be viewed in conjunction with the latest announcements and press releases from the major airlines which have warned of severe softening in demand.    

• CPI decreased 0.1% m-o-m (expected +0.1%) and 2.4% y-o-y (expected 2.5%)
• Core CPI increased 0.1% m-o-m (expected 0.3%) and 2.8% y-o-y (expected 3.0%)

12th Mar 2025

Key takeaway: In sharp contrast to the previous month, the latest CPI release was good news all over! Headline CPI increased 0.2% m-o-m on a SA basis in February, sharply lower than the 0.5% seen in the previous month of January. The print was also lower compared to consensus expectations of 0.3%. Similarly, core CPI also came in at 0.2% compared to consensus expectations of 0.3%. Energy and shelter were the prime components which resulted in a lower print. Energy inflation increased 0.2% in February, sharply down from 1.1% in January. Gasoline and fuel oil both moved sharply lower. Shelter inflation rose 0.3%, the same as the previous month. The Index for owners equivalent rent increased 0.3%, once again the same as the previous month. The expectation is for the shelter component to continue it downward trend and contribute to further easing of headline inflation. Another noteworthy point in today’s report was a sharp decline in vehicle inflation – both new and used cares. New vehicles declined 0.1% m-o-m and used cars increased 0.9% compared to 2.2% in January. Lastly, there was the sharp deceleration in Core Services Ex Housing as well. The measure increased by approximately 0.2% on a m-o-m basis. On a y-o-y basis, it came down from around 4% to 3.74%. The figure is likely to go down even further given higher base effects in 2024. Another notable component of today’s report was a sharp drop in Airline fares. This needs to be viewed in conjunction with the latest announcements and press releases from the major airlines which have warned of severe softening in demand.    

• CPI increased 0.2% m-o-m (expected +0.3%) and 2.8% y-o-y (expected 2.9%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 3.1% y-o-y (expected 3.2%)

11th Feb 2025

Key takeaway: Bad news all over! The Headline CPI increased 0.5% m-o-m on a SA basis in January compared to expectations of 0.3%. Similarly, core CPI came in at 0.4% compared to consensus expectations of 0.3%. The print was substantially above expectations on both fronts and there was no good news to scrape in the details of the report either. Well almost! Shelter inflation rose 0.4%, the same as the previous month. The Index for owners equivalent rent increased 0.3%, once again the same as the previous month. While there was no improvement in the monthly figures for these 2 critical components, they did not deteriorate either. There seems a good chance that we will get a resumption in the downward trajectory of these components in the coming months. Another key point to note was the sharp acceleration in Core Services Ex Housing. The measure increased approximately by a sharp 0.7% on a m-o-m basis. On a y-o-y basis, it remained at around 4% – still uncomfortably high for the Fed. Yields rose sharply in immediate response and the equity markets were solidly down. The 10 year jumped more than 10 basis points above 4.6%. Core goods inflation printed at 0.3% m-o-m. Used Car prices increased a sharp 2.2% m-o-m. The Manheim Used Car Index, a good leading indicator of the CPI component, has also been indicating an increase over the past few months. Medical Services was flat at 0% after having printed a muted 0.2% the previous month in December.   

• CPI increased 0.5% m-o-m (expected +0.3%) and 3.0% y-o-y (expected 2.9%)
• Core CPI increased 0.4% m-o-m (expected 0.3%) and 3.3% y-o-y (expected 3.1%)

15th Jan 2025

Key takeaway: After a soft PPI release yesterday, it is the CPI’s turn today to surprise on the downside. The latest CPI release for the month of December showed headline CPI increase 0.4% m-o-m and 2.9% y-o-y. While the yearly headline number is an increase over the 2.7% recorded in November, the downside surprise was in the core measures. CPI, ex food and energy, increased 0.2% m-o-m and 3.2% y-o-y. Both measures were slightly lower than expected. But that was enough for the markets to latch on to. Yields fell in immediate response and the equity markets were solidly up. Core goods inflation printed at a muted 0.1% m-o-m. Used Car prices increased 1.2% m-o-m after having increased 2.7% in October and 2.0% in November. The Manheim Used Car Index, a good leading indicator of the CPI component, has also been indicating an increase over the past few months. Medical Services printed a muted 0.2% after having printed 0.7%, 0.4% and 0.4% in the previous 3 months. Finally Shelter also printed 0.3%, the same as the previous month of November. OER printed 0.3%, a slight increase from the previous month and and Rent of Primary Residence also printed 0.3%. This stubborn component of CPI has started to show signs of decline over the past few months and is expected to contribute significantly to overall decrease in inflation going forward. These are some of the lowest prints on Shelter since the inflation episode started in 2021.   

• CPI increased 0.4% m-o-m (expected +0.4%) and 2.9% y-o-y (expected 2.9%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 3.2% y-o-y (expected 3.3%)

11th Dec 2024

Key takeaway: Before we begin a description of the latest CPI print, it is worth stating the highlight of the day. The Mag 7 stocks have ripped higher once again with the Nasdaq closing above 20K for the first time and stocks like Tesla and Google up more than 5% for the day. It is difficult to say, but the “in-line” CPI print might have contributed to the resurgent rally in tech stocks to some extent. The November CPI report was mostly in line with expectations – at least it seems so on the surface. The headline Index increased 2.7% – a slight acceleration from the 2.6% in October. The Core CPI Index increased 3.3%, in line with expectations and at the same level as the previous month. However, the underling detail showed that core components of the CPI basket increased at the fastest pace in recent months. Core goods inflation printed at a sizeable 0.3% m-o-m. Used Car prices increased 2.0% m-o-m after increasing 2.7% in October. The Manheim Used Car Index, a good leading indicator of the CPI component, has also been indicating an increase over the past few months. Medical Services printed 0.4%. The past 3 months have seen prints of 0.7%, 0.4% and 0.4% on Medical Services. In fact, core services ex housing, which was Chair Powell’s favourite indicator over a year ago, has remained above 4% for entire 2024 and shows no signs of decelerating on the basis of 3 month and 6 month annualized numbers. Just as we expected though, the saviour for the CPI print has started to be Housing. The stubborn component of CPI has started to show signs of decline over the past few months. Shelter printed at 0.3%. OER printed 0.2% and the Index for Rent printed 0.2% as well. These are some of the lowest prints since the inflation episode started in 2021. We expect Shelter to continue printing soft numbers in 2025. However, any core goods and services inflation acceleration will make the Fed nervous about a 2nd “transitory” mistake.   

• CPI increased 0.3% m-o-m (expected +0.3%) and 2.7% y-o-y (expected 2.7%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 3.3% y-o-y (expected 3.3%)

13th Nov 2024

Key takeaway: The hotly anticipated October CPI report is out. But it has turned out to be a damp squib. While CPI accelerated on a y-o-y basis from 2.4% to 2.6%, the report, and most individual components, were largely in line with expectations. Hence, there was not much of a reaction in bond markets with one important exception. The probability of a 25 bps rate cut in December got solidified since the report did not surprise to the upside. The headline CPI printed at 0.2% m-o-m and 2.6% y-o-y. Core CPI printed at 0.3% and 3.3% respectively. Core CPI was unchanged from the previous month of September. Core services ex housing had accelerated in August and September. It cooled off a bit in October. But at above 4% y-o-y, it still remains much to0 high. Shelter inflation, which remains a key hurdle, was 0.5% in August, 0.2% in September and printed 0.4% in the latest data for October. It remains likely that we will see many more months of softer shelter prints in the near future which will keep downward pressure on CPI – given its large weightage in the Index. Core goods inflation, after having printed positive 0.2% in September, was unchanged at 0% in October. One notable point in goods data was a spike of 2.7% m-o-m in used car prices. However, that is seen to be an exception due to hurricane related effects and unlikely to repeat in the future.  

• CPI increased 0.2% m-o-m (expected +0.2%) and 2.6% y-o-y (expected 2.6%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 3.3% y-o-y (expected 3.3%)

10th Oct 2024

Key takeaway: The latest CPI release showed inflation accelerated a bit in the month of September. The headline CPI printed at 0.2% m-o-m and 2.4% y-o-y. Core CPI printed at 0.3% and 3.3% respectively. Both metrics were slightly higher than the previous month. But more importantly, they were also higher than consensus expectations. Recall that the previous month’s CPI report had in fact been a mixed picture. A detailed scrutiny of the previous month’s inflation report had shown that underlying inflationary pressures still exist and the path to 2% goal remained as difficult as it has been over the past 1-2 years. Core services ex housing had also accelerated in August and Shelter inflation, which remains a key hurdle, had remained elevated at 0.5% in August. Yet, the Fed cut 50 basis points. Since then a hotter-than-expected jobs release for September has caused rate cut expectations to be rolled back. The latest CPI release for September has added to those concerns and the 10 year yields has continued its march upwards in response. There were a few other points to note in the latest CPI report. Shelter inflation slowed down significantly at 0.2%. It is more likely that we will see many more months of 0.2% prints in the near future. This will keep downward pressure on Core CPI. On the other hand, Core Services Ex Housing accelerated significantly in September. This measure has mostly remained very elevated above 4% for most of the past 1-2 years. Core goods inflation also printed positive at 0.2% compared to the negative prints for the past 6 months. The last mile remains as difficult as many market participants had predicted it to be!  

• CPI increased 0.2% m-o-m (expected +0.1%) and 2.4% y-o-y (expected 2.3%)
• Core CPI increased 0.3% m-o-m (expected 0.2%) and 3.3% y-o-y (expected 3.2%)

11th Sep 2024

Key takeaway: In the backdrop of a weakening jobs market and the upcoming Fed September meeting, market participants were awaiting the latest August CPI report with bated breadth. A lower-than-expected print would have given the Fed additional ammunition for justifying a 50 basis point cut. Instead, the report provided a mixed picture. While headline inflation rose as expected (0.2%), core CPI printed higher than expected at 0.3%. That was mostly on the back of a stubbornly high shelter inflation print. OER, which came in at 0.5%, continues to be the thorn in the Fed’s path. There continue to be a number of market participants and economists urging the Fed to look beyond the Shelter CPI data which tends to lag real time data on rents. However, it seems unlikely that the Fed will take this into account – at least for the upcoming September meeting. A 25 bps cut seems a certainty. The last point to note is that while Core Services ex Shelter has also come down significantly, it still remains relatively high for the Fed’s comfort. Core Services Ex Shelter actually accelerated a bit in the month of August compared to July. The y-o-y number also remains high at above 4% – where it has remained since the start of 2024.  

• CPI increased 0.2% m-o-m (expected +0.2%) and 2.5% y-o-y (expected 2.5%)
• Core CPI increased 0.3% m-o-m (expected 0.2%) and 3.2% y-o-y (expected 3.2%)

14th Aug 2024

Key takeaway: After 3 months of hotter than expected inflation prints and subsequent 3 months of softer than expected inflation prints, we are back to an environment where the inflation demon seems to have been quelled. The latest CPI release was mostly in line with market expectations. The monthly headline inflation number printed at +o.2% and the core inflation number also printed at +0.2%. The annual headline and core annual inflation now stands at 2.9% and 3.2%. A September rate cut is now a foregone conclusion. The key highlight of the latest report was a spike back up in Shelter inflation from 0.2% last month to 0.4% in July. However, even with the rise in the Shelter component, overall inflation still remained subdued. Core goods decreased 0.3% and core services increased 0.3%. 

• CPI increased 0.2% m-o-m (expected +0.2%) and 2.9% y-o-y (expected 3.0%)
• Core CPI increased 0.2% m-o-m (expected 0.2%) and 3.1% y-o-y (expected 3.1%)

11th Jul 2024

Key takeaway: June completes a tale of 2 cities for 1H 2024. The first 3 months were inflation surprises on the upside and the next 3 were on the downside. The latest CPI release pointed to a slower than expected pace of inflation. The monthly headline inflation number printed at minus o.1% against expectations of +0.1% and the core inflation number printed at +0.1% compared to an expectation of +0.2%. This also resulted in both the headline and core annual inflation numbers coming in lower than expected as well. This was amongst the softest inflation prints in recent months. Core inflation at 3.3% is the lowest since April 2021 when inflation first started rising in response to the pandemic related shifts in economy and demand / supply. The low inflation print has also solidified market expectations of a first rate cut in September. The key highlight of the latest report was the sharp drop in Shelter inflation to 0.2% m-o-m. The all important Index for OER increased 0.3% – also a marked downward shift from previous months. This was the first sign that the long awaited downward trajectory of Shelter inflation is finally here. Core goods decreased 0.1% and core services increased 0.1%. Lastly, core services ex-housing also declined substantially – the 3 month annualized number once again coming below 2%.

• CPI decreased 0.1% m-o-m (expected +0.1%) and 3.0% y-o-y (expected 3.1%)
• Core CPI increased 0.1% m-o-m (expected 0.2%) and 3.3% y-o-y (expected 3.4%)

12th Jun 2024

Key takeaway: The most important economic data release is here and it has not failed to stir excitement. After 3 continuous months of hot inflation prints, April provided some respite with CPI coming in cooler than expected and May has followed it up with an ever cooler print. Markets grabbed at the opportunity with both hands with the 10 year yield moving lower by almost 12 basis points to 4.28% and the S&P500 up 1% in the first hour of trading – similar to the immediate market post the last month’s release. The Fed will certainly be glad to see this outcome for the 2nd month in a row. This puts a September rate cut back on the table with a chance for a July rate cut as well – especially since the Fed will be able to take into account one more NFP and inflation print before their next meeting. However, there were a few more points to note about the release. Firstly, goods disinflation or deflation continued in line with the trend seen most of last year. Commodities ex food and energy was unchanged 0.0%, New vehicles fell 0.5% and Used Cars and Trucks increased 0.6%. Services ex Energy also softened to a 0.2% monthly gain – much smaller than the 0.4-0.7% range seen in the months before. Unfortunately, Shelter remained stubborn at 0.4%, mostly on account of a 0.4% increase in OER. However, the overall report was a definite disinflationary indicator with Core CPI underperforming expectations at 0.2% m-o-m. 

• CPI unchanged 0.0% m-o-m (expected 0.1%) and 3.3% y-o-y (expected 3.4%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 3.4% y-o-y (expected 3.5%)

15th May 2024

Key takeaway: After 3 continuous months of hot inflation prints, April provided some respite with CPI coming in cooler than expected. Markets grabbed at the opportunity with both hands with the 10 year yield moving lower by almost 12 basis points and the S&P500 up 1% on the day. The Fed will certainly be glad to see this outcome. However, there were a few more points to note about the release. Firstly, goods disinflation or deflation continued in line with the trend seen most of last year. Commodities ex food and energy fell 0.1%, New vehicles fell 0.4% and Used Cars and Trucks fell 1.4%. However, Services continued to display its sticky attributes similar to the past 12-18 months. Firstly, the widely anticipated drop in Shelter CPI is still not here. Shelter increased 0.4% m-o-m and OER also increased 0.4% m-o-m. More importantly though, core services ex housing still remains highly elevated and much too high for the Fed’s comfort. Even though the measure moderated a bit from the previous month, on a one to 6 month annualized basis, it still remains in the 5-6% level. Nonetheless, even with this inflationary aspect, the overall report was bearish for yields in general. It was also compounded by a weaker than expected Retail Sales report.

• CPI increased 0.3% m-o-m (expected 0.4%) and 3.4% y-o-y (expected 3.4%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 3.6% y-o-y (expected 3.6%)

10th Apr 2024

Key takeaway: One month does not make a trend. Two merits a bit more attention. But, three is major cause for concern! I am still stopping short of calling this a catastrophe. Although it is starting to shape like one. For the third month in a row inflation has surprised everyone on the upside. Headline inflation came in hotter than expected at 0.4% m-o-m and Core inflation came in higher than expected also at 0.4% m-o-m. Similar to February, a large part of the CPI increase for March was driven by energy costs. Similarly, Shelter – at 0.4% m-o-m – continues to be the stubborn problem that it has been for the past 2 years. Food inflation was muted at 0.1% and Used cars actually fell 1.1%. Where was the issue then? Services ! More specifically, Core Services ex Housing – also called super core inflation popularised by Chair Powell. Core Services ex Housing CPI now stands at 4.6% y-o-y compared to 3.5% in mid 2023. Similarly, the 6 month annualized Core Services ex Housing now stands at 6.3% compared to the 2.4% in mid 2023. And finally the equivalent 3 month measure stands at 8%! The Fed is bound to take into consideration these figures amidst renewed chatter of a wage price spiral. The “lesser cuts for longer” camp has gained a lot more strength post this CPI report. 

• CPI increased 0.4% m-o-m (expected 0.3%) and 3.5% y-o-y (expected 3.4%)
• Core CPI increased 0.4% m-o-m (expected 0.3%) and 3.8% y-o-y (expected 3.7%)

12th Mar 2024

Key takeaway: One month does not make a trend. But two merits a bit more attention. For the second month in a row inflation has surprised everyone on the upside. Headline inflation came in slightly hotter than expected at 0.4% m-o-m and Core inflation came in much higher than expected also at 0.4% m-o-m. A large part of the CPI increase was driven by shelter and energy costs. However, it was worth noting that Core Services ex shelter, which strips both energy and shelter, was still significantly high indicating wage price pressures. Core Services ex Housing CPI accelerated to 6.2% on a 3 month annualized basis and 5.5% on a 6 month annualized basis. That is way too high a level for the Fed to feel comfortable. However, so far the Fed does not seem to be overly concerned about the Core Services Ex Housing acceleration. Other indicators of wages like the ECI and average hourly earnings still seem to be in control. The few other points to note in this latest CPI release was the increase (0.5% m-o-m) in Used Cars and Trucks which had seen a large decline last month and the still stubborn Shelter component which increased at o.4% m-o-m or an annualized 4.8%. The sooner OER and correspondingly Shelter inflation comes into a more reasonable range, the sooner CPI will come down towards the Fed’s 2% goal.  

• CPI increased 0.4% m-o-m (expected 0.4%) and 3.2% y-o-y (expected 3.1%)
• Core CPI increased 0.4% m-o-m (expected 0.3%) and 3.8% y-o-y (expected 3.7%)

13th Feb 2023

Key takeaway: It might be a bit pre-mature to state that the world’s worst fears have come true. But it indeed is a scare at the minimum. US CPI for January surprised to the upside and reinforced the belief that the final mile in the fight against inflation is going to be very difficult to achieve. Headline CPI increased 0.3% m-o-m against an expectation of 0.2%. Similarly Core CPI also increased 0.4% m-o-m against expectations of 0.3%. Beneath the hood, there were a few more points to take note of. Firstly and most importantly the slowdown in housing inflation that everyone has come to expect for the past 18 months is still no where to be seen. Shelter inflation rose 0.6% m-o-m. OER, which is the largest component of Shelter, rose 0.6% as well. Rent of primary residence, which has a 7% weight in the CPI, also rose 0.4%. Without a sharp drop in Shelter inflation, it is almost impossible to achieve a sub 2% inflation number. Secondly, energy CPI declined 0.9% in January – which contributed significantly to a lower headline CPI print for January. However, both crude and gasoline prices have been rising over the past few weeks. Hence, we can expect the decline in energy CPI to reduce in the months going forward – which would make the task even more arduous. Used cars and trucks declined 3.4% m-o-m. However, we have also seen that declines in the Manheim Used Car Index have also been moderating of late. Finally, super core services or Core Services Ex Housing inflation also accelerated significantly in the month of January. This measure, as popularised by Chair Powell, now stands at approximately 4% y-o-y and 6% on a 3 month annualised basis. We have to remember that the reason this measure is key from an inflation perspective is that wages forms a core part of all the components in this CPI basket and hence any acceleration in this measure can be indicative of a wage price spiral.  

• CPI increased 0.3% m-o-m (expected 0.2%) and 3.1% y-o-y (expected 2.9%)
• Core CPI increased 0.4% m-o-m (expected 0.3%) and 3.9% y-o-y (expected 3.7%)

11th Jan 2024

Key takeaway: And the big day is here again! The BLS released its CPI figures for the last month of 2023. Headline CPI came in hotter than expected at 0.3% m-o-m vs consensus expectations of 0.2%. M-o-m Core inflation was in line with expectations at 0.3%. While the move does not look substantial on the surface, the report had a number of details to take note. Firstly, headline inflation was up y-o-y : 3.4% in December vs 3.1% in November. While the Fed prefers the Core measure, an increase in headline is noteworthy nonetheless, even though it might be caused by base effects. The second point to note was that energy inflation was up after a couple of months of large declines. The energy component has significant downstream impacts on inflation and hence a rise in energy prices is always concerning. The third point to note is that used car and trucks inflation also climbed a fair 0.5% m-o-m, making it the second month in a row of price increases. The more current Manheim Used Car Value Indec has also shown a tapering trend of declines in the value of the index in recent months. Having said that, it is more likely that we see a resumption in use car price declines going forward. The fourth point to note was that the much anticipated shelter disinflation is still not showing up in the official CPI data. Shelter inflation was up 0.5%. Rent of primary residence up 0.4%. Owners equivalent rent up 0.5%. Where is the disinflation in shelter? The Zillow Rent Index has been around the 3.0-3.5% range. But the shelter component in the CPI data continues to print around 5.0%. The fifth and the last point to note was that the Powell indicator of Core Services Ex Housing was mostly steady at approx 3.8% y-o-y, a slight increase from the previous month. But the key point is that this is the most stubborn portion of the entire CPI basket and there hasn’t been much progress on this key data point in the last 5 months!  

• CPI increased 0.3% m-o-m (expected 0.2%) and 3.4% y-o-y (expected 3.2%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 3.9% y-o-y (expected 3.8%)

12th Dec 2023

Key takeaway: Inflation has generally been trending down and is significantly lower than the mid 2022 highs of around 9%. The consensus expectation though is that the journey from around 3.5% down to 2.0% is going to be much tougher. Inflation readings had also come in lower than expected over the last few months resulting in massive rallies in risk assets. In contrast, CPI for the month of November came in slightly higher than expected at 0.1% m-o-m. Core CPI came in line with expectations at 0.3% m-o-m and 4.0% y-o-y. There is a lot riding on shelter inflation reducing significantly. However, shelter inflation climbed back up again from 0.3% to 0.4%. The important constituent of Owners Equivalent Rent also climbed up from 0.4% to 0.5%. It important for this shelter component to consistently print 0.1%-0.2% for Core CPI to reach 2% levels. Lastly the most important thing to note was that Core Services Ex Shelter still remains fairly elevated at 3.7% y-o-y. Most components of Core Services ex Housing registered increases in the month of November. While fears of a wage price inflation spiral have abated, Chair Powell would still firmly have an eye on this critical data point.   

• CPI increased 0.1% m-o-m (expected 0.0%) and 3.1% y-o-y (expected 3.1%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 4.0% y-o-y (expected 4.0%)

14th Nov 2023

Key takeaway: Headline CPI and Core CPI both came in softer than expected in October. Firstly, given the sharp drop in energy prices, a reduction in headline inflation was expected. Second, due to the large base effect from last October (0.5% m-o-m in October 2022), year over year headline CPI was also expected to drop significantly. However, in a far more important development, both headline and core CPI printed even lower than what markets were expecting – resulting in a face ripping rally across both equities and bonds. Commodities less food and energy commodities decreased 0.1% m-o-m. This category has printed negative for 5 months in a row. New vehicles and used car prices also declined in October. However, the most important aspect of October’s CPI report, was the drop in shelter inflation from 0.6% in September to 0.3% in October. The index for rent rose 0.5% in October and the index for OER rose 0.4%. Even with the reduction, the shelter index is still 6.7% higher compared to last year – accounting for 70% of the total increase in core CPI. As this number trends back down to a range of 3-4%, it will bring core CPI lower than the current level of 4%. The final point to note was that Core Services ex Housing, Chair Powell’s favourite measure, increased a bit on a 3 month annualized and 6 month annualized basis (approximately 5.3% and 3.4%). However, that was mostly attributable to base effects of a rolling 3 month and 6 month calculation. Core Services ex Housing now stands at 3.5% on a year on year basis and, even though it is higher than preferred, it will give the Fed significant comfort in their war against inflation.  

• CPI increased 0.0% m-o-m (expected 0.1%) and 3.2% y-o-y (expected 3.3%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 4.0% y-o-y (expected 4.1%)

12th Oct 2023

Key takeaway: After having bottomed at 3.0% in June, headline CPI was widely expected to reaccelerate given the recent increase in energy prices and the base effects from last years inflation numbers. Headline inflation for September 2023 printed at the same level of 3.7% as last month. However, that was slightly above consensus expectations of 3.6%. The m-o-m number at 0.4% was also slightly above consensus expectations of 0.3%. Core inflation, which is CPI ex-food and energy, came in line with expectations at 0.3% m-o-m and 4.1% y-o-y. Core goods prices continued to be in deflationary mode. Commodities less food and energy commodities have printed a negative inflation growth number for 4 months in a row. Similarly, used cars and trucks prices have also declined for 4 months in a row. Core services on the other hand continues to print high inflation growth numbers. The biggest news component of this month’s CPI print was in fact the sharp rise in Shelter inflation. One of the core assumptions of the Fed has been that shelter inflation will come down rapidly in line with the other private measures of rent. However, September saw a sharp jump in m-o-m shelter inflation. The fact that the rise in the shelter component was significantly attributable to Owners Equivalent of Rent was even more concerning since OER contributes 25% of headline inflation. OER jumped up sharply from 0.4% in August to 0.6% in September. Lastly, Powell’s favourite measure of core services ex-housing remained mostly steady (but is higher than where the Fed would like it to be) .  

• CPI increased 0.4% m-o-m (expected 0.3%) and 3.7% y-o-y (expected 3.6%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 4.1% y-o-y (expected 4.1%)

13th Sep 2023

Key takeaway: The latest August CPI report was expected to show a further re-acceleration of inflation after July. That is precisely what it showed. Specifically, we have seen energy costs rise significantly in recent weeks. Accordingly, the y-o-y CPI print was up from 3.2% in July to 3.7% in August. This was slightly higher than consensus view. Similarly, the monthly print was up 0.3% – higher than consensus expectation of 0.2%. Core inflation was also up a significant 0.6% m-o-m. However, despite all the increases in core and headline CPI, the key point of the August inflation report was the substantial rise in core services ex housing inflation – aka “The Powell Indicator”. This indicator was up an approximate 0.6% m-o-m, a significant re-acceleration from recent months. On a 3m annualized, 6m annualized and 12 month basis, core services ex housing grew at approximately 3.2%, 2.9% and 4.0% respectively. Almost every key category in services experienced re-accelerating inflation. However, the most significant increases were in medical services and transportation (more specifically airfares which increased a sizeable 4.9% m-o-m. The report overall keeps the pressure on both the Fed and consequently bond yields.  

• CPI increased 0.3% m-o-m (expected 0.2%) and 3.7% y-o-y (expected 3.6%)
• Core CPI increased 0.3% m-o-m (expected 0.2%) and 4.3% y-o-y (expected 4.3%)

10th Aug 2023

Key takeaway: The most important economic data point is here. And for some it has turned to be a non-event! The latest July CPI report was expected to show a re-acceleration of inflation. That is precisely what it showed. But the pace of re-acceleration or the components of underlying re-acceleration were not stark enough to spook the markets. Little surprise then that the market perceived the latest CPI data as good news! Firstly, headline inflation accelerated from 3.0% to3.2%. However, on a 3-month annualized basis, headline CPI is as low as 2.0%. Second, core inflation remained more or less static. Y-o-y core inflation moderated somewhat from 4.8% to 4.7%. Again, however, on a 3-month annualized basis, core inflation is as low as 3.2%. Lastly, Chairman Powell’s favourite measure of Core Services Inflation Ex Housing remained fairly steady in July. While medical services inflation cooled further into deflation territory, other segments like transportation services, recreation services and education services accelerated compared to June. Two of the key reasons for the disinflation narrative in this latest inflation report was the fall in used car price inflation (minus 1.3% m-o-m in July) and the fall in commodities ex. food and energy (minus 0.3% m-o-m in July). Commodity prices, in general, have been increasing in the past few weeks. This puts greater spotlight now on the next inflation report. 

• CPI increased 0.2% m-o-m (expected 0.2%) and 3.2% y-o-y (expected 3.3%)
• Core CPI increased 0.2% m-o-m (expected 0.2%) and 4.7% y-o-y (expected 4.7%)

12th Jul 2023

Key takeaway: The latest June CPI report was really all about Core Inflation and specifically Chairman Powell’s favourite measure of Core Services Inflation Ex Housing. Firstly, core inflation – which strips out the volatile components of food and energy, increased only 0.2% m-o-m. This was the lowest m-o-m reading in almost 2 years! Recall that even the May headline CPI print had been low, but core inflation in May was still 0.4% m-o-m. In comparison, Core CPI in June at 0.2% was low and beat expectations as well. Secondly, Core Services Ex Housing also printed a substantially low number. The 3 month annualized rate of core services inflation ex housing was just 1.5%! This was the standout feature of the latest CPI report. One of the main reasons for the low print was the drop in airline fares index by 8.1% m-o-m. Other categories like education services, medical care services, etc also registered either negative m-o-m prints or substantially low inflation. Finally, the icing on the cake was also a drop in Shelter Index and more specifically the Owners Equivalent Rent Index. The Shelter Index, which accounts for 34% of the overall CPI basket, increased 0.4% m-o-m – a drop from the 0.6% in May. More specifically, the Owners Equivalent Rent Index, which drives the Shelter Index, also dropped to 0.4% m-o-m from 0.5% (which had been the level for the past few months). The equity markets response to the print was hardly surprising then!

• CPI increased 0.2% m-o-m (expected 0.3%) and 3.0% y-o-y (expected 3.1%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 4.8% y-o-y (expected 5.0%)

13th Jun 2023

Key takeaway: The latest May 2023 CPI report had some interesting points to note. Firstly, headline CPI continued to drop substantially, primarily on account of drop in energy prices. Headline CPI was 4.0% in May – a large drop from 4.9% in April. On the other hand though, core CPI still remained elevated at 5.3% y-o-y and 0.4% m-o-m. Given that peak Core CPI was 6.6%, there hasn’t been much of a decrease in this key metric. However, a large part of core CPI’s chart behavior is attributable to the shelter component (which is ~35% of the CPI basket) . There are 2 key inferences to draw here. Firstly, core services CPI ex-housing has indeed come down substantially. This favorite metric of Chair Powell registered 0.2% m-o-m in May. On a 3-month annualized basis, this metric sums up to ~2.5% now – which is within striking distance of an over 2% inflation target. On the other hand, shelter inflation is still elevated. M-o-M shelter inflation jumped back up again from 0.4% in April to 0.6% in May. The drop in the earlier month of April was attributable to a 3.0% drop in lodging away from home. This category reversed to a positive 1.8% increase in May. The more important Owners Equivalent Rent of Residence remained elevated at 0.5% m-o-m. The Fed (and the broader market) is riding on shelter inflation coming down substantially in the 2nd half of 2023. The Residential Real Estate market, in the meantime, is having a bit of a resurgence.  

• CPI increased 0.1% m-o-m (expected 0.2%) and 4.0% y-o-y (expected 4.1%)
• Core CPI increased 0.4% m-o-m (expected 0.4%) and 5.3% y-o-y (expected 5.3%)

10th May 2023

Key takeaway: After 2 months of adverse inflation surprises in Jan and Feb, March had shown some positives on the inflation front and April helped further in that effort. While month on month readings for both headline and core (0.4%) were in line with consensus expectations, headline CPI fell to 4.9% on a y-o-y basis. This is the first time that the number has broken into the 4 handle in many months. Most importantly though, Chairman Powell favorite measure – Core Services Ex Housing increased just a meagre 0.1% m-o-m. The 3-month annualized number has also now fallen to a reasonable 3.4%. The drop in this measure was largely attributable to Transportation – which well from a +1.4% in March to a -0.2% in April! The inflation rate of most other types of services also cooled in April. Finally, shelter inflation dropped a substantial amount as well – from 0.8% in Feb to 0.6% in Mar to 0.4% in Apr. Risk markets generally cheered in immediate response and the 2 year note yield fell 6 basis points in immediate response as well. However there were 2 negatives points to note as well. First, the used car price index increased from -0.9% in Mar to +4.4% in Apr. Thats a sizeable jump and puts a bit of a question mark on the goods deflation story. Second, while headline shelter inflation softened, most of that fall is attributable to Lodging Away From Home and not in the more important Owners Equivalent Rent (which has a 25% weight in the CPI basket). 

• CPI increased 0.4% m-o-m (expected 0.4%) and 4.9% y-o-y (expected 5.0%)
• Core CPI increased 0.4% m-o-m (expected 0.4%) and 5.5% y-o-y (expected 5.5%)

12th Apr 2023

Key takeaway: After 2 months of adverse inflation surprises, March showed some positives on the inflation front. And risk markets have latched on to it with both hands! Dow Futures were up 200 points in immediate response. Lets look at the details. Headline inflation came in lower than expected (o.1% vs 0.2%). Core inflation came in as expected (0.4% vs 0.4%). The major drop in inflation was in the Shelter component. Owners equivalent rent of residence increased 0.5% m-o-m vs 0.7% in Feb. This was one of the key drivers that caused the lower print. And of course, the Energy component printing a huge minus 3.5% helped the headline inflation lower. However, it is key to note that core services ex housing is still high at ~5.7% y-o-y or about 4.0% 3-month annualized basis! The last point to note is that used car and trucks fell 0.9% m-o-m. This is still in contrast to the positive numbers that have been a feature of the Manheim used car index for the past 3 months! In summary, while markets might have taken this CPI print in their stride, the pressure on the Fed has not likely abated with these numbers. 

• CPI increased 0.1% m-o-m (expected 0.2%) and 5.0% y-o-y (expected 5.2%)
• Core CPI increased 0.4% m-o-m (expected 0.4%) and 5.6% y-o-y (expected 5.6%)

14th Mar 2023

Key takeaway: Had the US banks fiasco not happened last weekend, markets would have been more reactive to today’s inflation print. However, given what transpired over the weekend, today’s CPI was almost a non-event. Yet, it is key to note that core inflationary pressures still persist – and in a significant way. Core CPI was up 0.5% m-o-m, accelerating from 0.4% last month. On a year on year basis, 5.5% core inflation still remains too high for the Fed’s comfort. Moreover a large part of the inflation increase was services – both housing and core services ex housing. Categories which increased in Feb included shelter, recreation and airline fares. The 3-month annualized core services ex housing inflation rate inched up a bit to above 4%. Used car inflation still printed negative in Feb (minus 2.8%). Worth remembering that the Manheim used car index has been rising for the past 3 months! In short, while the markets might have taken this CPI print in their stride, the pressure on the Fed has not abated at all with these numbers. 

• CPI increased 0.4% m-o-m (expected 0.4%) and 6.0% y-o-y (expected 6.0%)
• Core CPI increased 0.5% m-o-m (expected 0.4%) and 5.5% y-o-y (expected 5.5%)

14th Feb 2023

Key takeaway: And the big day is finally here! While headline numbers show that CPI data (both headline and core) was in line with expectations, there is more to analyse below the surface. Firstly, energy prices were up 2.0% m-o-m which contributed to the large uptick in headline inflation from 0.1% in December to 0.5% in January. Second – used car prices were down 1.9% m-o-m. That’s in contrast to some of the private measures which have been showing that used car prices have been inching up. i.e. this increased might show up in the Feb release. Third – apparel was up significantly at 0.8% m-o-m compared to 0.2% in December. Fourth – shelter inflation still remains uncomfortably high at 0.7%. Lastly, “Super Core” or Core Services Ex Housing was up approximately 0.3% on a m-o-m basis. Remember this is the measure Chair Powell looks at and at approximately 6% y-o-y, it is still way to high! One of the key components of “Super Core” – transportation services was up 0.9% m-o-m. Last month’s data point on transportation services was substantially revised up as well. In short, while the numbers looked ok on the surface, the details did not look all that good. 

• CPI increased 0.5% m-o-m (expected 0.5%) and 6.4% y-o-y (expected 6.2%)
• Core CPI increased 0.4% m-o-m (expected 0.4%) and 5.6% y-o-y (expected 5.5%)

12th Jan 2023

Key takeaway: This was arguably the most watched data point across the world! And when it came, neither did it disappoint nor did it cheer! At least on headline. But there was one particular point in the report which was worth noting. Services less rent of shelter accelerated from 0.0% in Nov to 0.4% in Dec. Services less medical care services accelerated from 0.5% in Nov to 0.7% in Dec. Indeed these 2 numbers include energy inflation. But it is important to once again to remind everyone of what Mr Powell spoke about in the recent past – Focus on core services inflation! Nonetheless, it was heartening to see headline fall to a negative 0.1% and core come in line with expectations at 0.3%. Another surprise in the detailed data was apparel inflation accelerating from 0.2% to 0.5%.  Lastly, even though we know that the Fed is looking at real time measures of rent (which are falling), it is still important to note that Shelter inflation remains very high at 0.8% m-o-m (and accelerated from 0.6% in Nov)

• CPI declined to -0.1% m-o-m (expected 0.0%) and 6.5% y-o-y (expected 6.5%)
• Core CPI increased 0.3% m-o-m (expected 0.3%) and 5.7% y-o-y (expected 5.7%)

13th Dec 2022

Key takeaway: Another month – another positive surprise on inflation ! But there was a key difference in market reaction between the October print and the November print. When October’s core inflation printed below expectations at 0.3%, Dow Futures were up 800 points within 5 minutes of the CPI release at 8.30am EST. The Dow closed 3.5% up that day on 10th Nov. In similar fashion, Dow Futures were up 500 points within minutes of the November CPI release today. But by mid-day the Dow had given up all of its gains and finally closed the day 0.3% up only! Why the difference in market reaction though? There might be multiple reasons for this and it is hard to know for certain. But, like I have mentioned in the past, with passage of time, attention will shift from “rates” to “earnings”. Recessionary data has been gaining steam and the path to a soft landing has been narrowing (acknowledged by Powell as well!). The CPI data itself was benign all round – Almost all categories recorded a decrease in m-o-m inflation. The all important services category registered some of the largest declines in categories like medical care services and airline fares. New vehicles and Used cars, which accounts for almost 8% of the CPI basket, grew 0.0% and minus 2.9% respectively. Shelter continued to grow at a high 0.6% – but we now very well know how the FOMC thinks about this component of inflation (read here). In summary, we can expect inflation to continue its path downward. I, for one, believe it might not move down at the same pace as markets are currently pricing (forward inflation swaps). But we will know that for certain only in hindsight. In the meantime, I believe it is time to shift focus to earnings!  

• CPI increased 0.1% m-o-m (expected 0.3%) and 7.1% y-o-y (expected 7.3%)
• Core CPI increased 0.2% m-o-m (expected 0.3%) and 6.0% y-o-y (expected 6.1%)

10th Nov 2022

Key takeaway: One sentence to describe today’s CPI release. “Dow Futures were up 800 points within 5 minutes of the CPI release at 8.30am EST!). After 2 months of consecutive higher prints on inflation, CPI in October finally came in lower than expected! And fairly substantially! Core CPI increased 0.3% m-o-m when expectations pointed to a 0.5% rise. Almost every category in the CPI grew at a lower rate or actually declined compared to the previous month – including food, new vehicles, used cars and apparel. But the notable reduction was medical care commodities and services (which collectively account for almost 8% weightage in the CPI basket). Medical care services fell 0.6% m-o-m compared to an average of plus 0.6% in the last 6 months. A word of caution though – Shelter which is one of the stickiest components of CPI actually increased to 0.8% from 0.7% in September. 

• CPI increased 0.4% m-o-m (expected 0.6%) and 7.7% y-o-y (expected 8.0%)
• Core CPI increased 0.3% m-o-m (expected 0.5%) and 6.3% y-o-y (expected 6.5%)

13th Oct 2022

Key takeaway: Another month – another high CPI print. 8.2% y-o-y. In response, the S&P500 opened almost 2.5% down. But when you dig a bit deeper the report was not that bad! Here’s why. Core CPI m-o-m, which matters the most, increased 0.6% for the third month in a row. That’s uncomfortably high. Shelter increased 0.7% again which is also way too high. However, used car prices fell 1.1%. Apparel fell 0.3% and medical care commodities also fell 0.1%. The transportation index was higher because of an increase of 0.8% in air fares. But air fares had fallen 7.8% and 4.6% in the 2 months before. Even though rent was up 0.7%, private indexes of rent has been falling in the past months and gradually will reflect in the BLS CPI calculations. Medical Care services, is a big component of CPI and has been increasing a lot in the past months. It is expected to moderate post October as well.      

• CPI increased 0.4% m-o-m (expected 0.2%) and 8.2% y-o-y (expected 8.1%)
• Core CPI increased 0.6% m-o-m (expected 0.5%) and 6.6% y-o-y (expected 6.5%)

13th Sep 2022

Key takeaway: Unbelievable ! This is why forecasting is such a rough game. This inflation report was all about core / sticky / entrenched inflation. Headline (0.1%) came in higher than expected and fuel inflation fell as expected. But it was not enough to offset the rise in the core, sticky components of inflation. The most important being Shelter, which rose a substantial 0.7%. Airline prices fell, but lesser than expected. And medical services prices rose substantially as well. In response to this inflation report, dont get fixated on whether the Fed will raise 75 bps or even 100 next week. What is more important is that it implies higher rates for a much longer period of time that markets were pricing in before this print!     

• CPI increased 0.1% m-o-m (expected minus 0.1%) and 8.3% y-o-y (expected 8.1%)
• Core CPI increased 0.6% m-o-m (expected 0.3%) and 6.3% y-o-y (expected 6.1%)

10th Aug 2022

Key takeaway: Good news finally! Headline CPI was anyways expected to be lower, thanks to the fall in crude oil price in July. However, the big surprise from this July inflation print was monthly Core CPI increase of 0.3% which was lower than expectations and much lower than June’s 0.7%. There are a few points of note though. Firstly, one month does not make a trend. So lets not throw caution to the wind. Second, shelter, which is a stick component of core inflation, still remains quite high. Used car prices came down as well, but need to be tracked in subsequent months. And finally reducing airline fares also had a big contribution to the lower print and they are quite volatile. Risk assets are celebrating though!     

• CPI increased 0.0% m-o-m (expected 0.2%) and 8.5% y-o-y (expected 8.7%)
• Core CPI increased 0.3% m-o-m (expected 0.5%) and 5.9% y-o-y (expected 6.1%)

13th Jul 2022

Key takeaway: Doom and Gloom! The 1.3% m-o-m increase beat even May’s gigantic 1.0% increase. But what was really worrisome was the continuing increase in core inflation. But this was expected to some extent. Shelter is a sticky component of core CPI and the runaway house prices over the past year are working their way into the shelter component of CPI. Another aspect which was worrisome was the increase in certain goods inflation – like used car prices which were up 1.6% m-o-m. In March, when economists were calling for peak inflation, used car prices had fallen 3.8% m-o-m. Yet, it is probably time to be more optimistic in the markets regarding peak inflation. Dont lose sight of the fact that prices across the entire commodity complex have crashed starting mid-June, inventories have been piling up, retailers started offering discounts in July and gas prices at the pump levelled off as well!     

• CPI increased 1.3% m-o-m (expected 1.1%) and 9.1% y-o-y (expected 8.8%)
• Core CPI increased 0.7% m-o-m (expected 0.6%) and 5.9% y-o-y (expected 5.7%)

10th Jun 2022

Key takeaway: This was a print worthy of an 800 point drop in the Dow like we saw in the first hour of trading. A rip roaring inflation number! Like I mentioned previously, it is way too early to call a peak in inflation. 1% m-o-m rate of increase is gigantic. Here are some of other finer points you got to know. Used Cars and Apparel both increased m-o-m after having declined in April which indicated that goods demand has not softened as much. Shelter rose 0.6% (4 consecutive months of 0.5% or higher). Remember again – this is a sticky component! Lastly, energy prices roared up again, but that was expected given May oil price gains after brief declines in April. And if the first 10 days of June are any indication of the rest of the month, this component simply gets worse.     

• CPI increased 1.0% m-o-m (expected 0.7%) and 8.6% y-o-y (expected 8.3%)
• Core CPI increased 0.6% m-o-m (expected 0.5%) and 6.0% y-o-y (expected 5.9%)

11th May 2022

Key takeaway: This month’s reading is precisely why calling a peak in inflation is so tough and perilous to do (see last month’s comments). In March 2022, core inflation moderated to 0.3% m-o-m. This figure is back up to 0.6% ! Moderating goods inflation was expected – given the economy is opening up. The focus is really on services. For instance, Transportation jumped 3.1% and Medical Care rose 0.5% m-o-m. Shelter, which is a sticky component of core inflation, increased 0.5% for a third month is a row. As the economy shifts back from stay-at-home goods consumption to out-and-about services consumption, entrenched wage inflation becomes supremely paramount.   

• CPI increased 0.3% m-o-m (expected 0.2%) and 8.3% y-o-y (expected 8.1%)
• Core CPI increased 0.6% m-o-m (expected 0.4%) and 6.2% y-o-y (expected 6.0%)

12th Apr 2022

Key takeaway: What matters most from a monetary policy perspective is Core CPI – month over month. And the March print of 0.3% gives hope that core inflation might finally be peaking. However, 2 points of caution to note. First, shelter (i.e. rent) rate of inflation still remains high (0.5% mom). Second, a large portion of the drop in core inflation was due to falling used car prices. This was expected since used car prices had really gone through the roof. In summary, the lower core inflation print gives markets hope. But it is too early to say. Keep tracking!  

• CPI increased 1.2% over last month (expected 1.2%) and 8.5% year over year (expected 8.4%)
• Core CPI increased 0.3% over last month (expected 0.5%) and 6.5% year over year (expected 6.5%)

10th Mar 2022

Key takeaway: A 40-year high! More importantly, this number does not capture much of the massive oil price increase post start of invasion. So the CPI is yet to peak. Far from it. Another key point is the index increase of the “Shelter” component of CPI (which is one of the largest components of the index). It increased 4.7% (largest increase since May 1991). The “Shelter” component in CPI tends to be structural and sticky. Fasten your seat belts. This ride is going higher! 

• CPI increased 0.8% over last month (expected 0.8%) and 7.9% year over year (expected 7.9%)