Wednesday, September 11th, 2024
The most important economic report of the week — the Consumer Price Index (CPI) for August — came out flat-to-mixed this morning. Pre-market futures were sent an immediate downward tilt, but seem to have leveled off around current lows: the Dow -270 points, the Nasdaq -120 and the S&P 500 -25 points.
CPI Flat on Headline Month Over Month, Warmer on Core
The August print reached +0.2% for
headline CPI month over month, matching the previous month but up from the -0.1% reported for June and 0.0% in May.
Core CPI (stripping out volatile food and energy prices) month over month came in at +0.3%, 10 basis points (10 bps) warmer than expected, and the highest read since April of this year.
At first glance, these may look like benign figures. However, when we consider the CPI charts in 2024 had dipped into negative territory earlier this summer, that they are now steadily above there makes it less likely the Fed will be cutting interest rates by 50 bps this time next week. The slightly hotter +0.3% on core further asserts this premise.
CPI Inflation Rate Lowest Since February 2021
The most encouraging news from this report came from arguably its most important metric: headline CPI year over year, aka the
Inflation Rate. This tumbled 40 bps to +2.5% month over month, and lower than analysts had been anticipating.
It’s the lowest Inflation Rate since the first full month of the Biden administration: +1.7% in February 2021. Consider also that it’s off a multi-decade high +9.1% back in June of ’22 — that’s -660 bps in just over two years. Not too shabby.
Core CPI year over year remained +3.2%, as expected. Obviously, this is a stickier aspect of inflation, as we see Owner’s Equivalent Rent remaining higher than desirable at +0.5%. This has accounted for +70% gains in CPI levels. Airline fares were also up for the month, but Energy and Used Cars were both down.
Take-Aways from Wednesday’s CPI Report
First, the good news: this is the fourth-straight favorable report from the CPI. While we’re not yet at +2% on the Inflation Rate, we’re closing in on it without crashing below it. This is (still) what a “soft landing” looks like.
The “bad” news isn’t even all that bad: the Fed is now much more likely to cut interest rates 25 bps next Wednesday than 50 bps. But recall there are still two more Fed meetings after this before 2024 concludes: the first week of November and the week prior to Christmas.
Should we see rates come down two more 25 bps moves, we’ll be in a range of +4.50-4.75% by the end of the year. And then we’ll have eight new meetings for 2025. Finally, pre-market futures have buoyed up: -16 points on the Dow, +7 on the Nasdaq and -8 on the S&P.
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Image: Bigstock
August CPI Mostly Flat: Good News and Bad News
Wednesday, September 11th, 2024
The most important economic report of the week — the Consumer Price Index (CPI) for August — came out flat-to-mixed this morning. Pre-market futures were sent an immediate downward tilt, but seem to have leveled off around current lows: the Dow -270 points, the Nasdaq -120 and the S&P 500 -25 points.
CPI Flat on Headline Month Over Month, Warmer on Core
The August print reached +0.2% for headline CPI month over month, matching the previous month but up from the -0.1% reported for June and 0.0% in May. Core CPI (stripping out volatile food and energy prices) month over month came in at +0.3%, 10 basis points (10 bps) warmer than expected, and the highest read since April of this year.
At first glance, these may look like benign figures. However, when we consider the CPI charts in 2024 had dipped into negative territory earlier this summer, that they are now steadily above there makes it less likely the Fed will be cutting interest rates by 50 bps this time next week. The slightly hotter +0.3% on core further asserts this premise.
CPI Inflation Rate Lowest Since February 2021
The most encouraging news from this report came from arguably its most important metric: headline CPI year over year, aka the Inflation Rate. This tumbled 40 bps to +2.5% month over month, and lower than analysts had been anticipating.
It’s the lowest Inflation Rate since the first full month of the Biden administration: +1.7% in February 2021. Consider also that it’s off a multi-decade high +9.1% back in June of ’22 — that’s -660 bps in just over two years. Not too shabby.
Core CPI year over year remained +3.2%, as expected. Obviously, this is a stickier aspect of inflation, as we see Owner’s Equivalent Rent remaining higher than desirable at +0.5%. This has accounted for +70% gains in CPI levels. Airline fares were also up for the month, but Energy and Used Cars were both down.
Take-Aways from Wednesday’s CPI Report
First, the good news: this is the fourth-straight favorable report from the CPI. While we’re not yet at +2% on the Inflation Rate, we’re closing in on it without crashing below it. This is (still) what a “soft landing” looks like.
The “bad” news isn’t even all that bad: the Fed is now much more likely to cut interest rates 25 bps next Wednesday than 50 bps. But recall there are still two more Fed meetings after this before 2024 concludes: the first week of November and the week prior to Christmas.
Should we see rates come down two more 25 bps moves, we’ll be in a range of +4.50-4.75% by the end of the year. And then we’ll have eight new meetings for 2025. Finally, pre-market futures have buoyed up: -16 points on the Dow, +7 on the Nasdaq and -8 on the S&P.
Questions or comments about this article and/or author? Click here>>