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Moderation In US Inflation

James Boston
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Moderation In US Inflation

The US Bureau of Labor Statistics has provided a comprehensive update to the country’s inflation situation today. The headline numbers just released are the Consumer Price Indices (CPI) for the month of July. The key year on year CPI is now reading at 2.0%, this is in comparison to the 2.1% price rate increase to June and a market consensus estimate for a reading of exactly 2.0% today. Month on month this number is now showing the rate of general price growth at 0.1%, the previous month’s figure was 0.3% and the consensus was for today’s reading of 0.1%. This implies that the absolute index level has risen from 233.504 to 236.25 on a non seasonally adjusted basis, market expectations would translate as 238.34.

The Core CPI (Ex Food & Energy) level has been reported as 238.31 in July, this compares to 238.083 in June. The percentage increase in this Core number remains at 1.9% year on year compared to the same 1.9% increase the previous month, there was no anticipation for any change on the figure in July. Month on month this is showing a change of 0.1%, the comparison numbers here are a similar June reading of 0.1% and a consensus estimate of 0.2% price growth on the month.

This latest inflation update for the US economy contains no major surprises and is easily in line with levels that will that will give the Fed comfort around the pace of general price growth activity within the recovering economy. There have however been some question marks around the inflation calculation model being used to determine these official rates, this is not to say that there are errors in this decades old model but rather that the model may no longer be appropriate given the nature of the recent economic crises. The depth of the crises has fundamentally altered the spending habits of individuals, among other structural and behavioural changes, and it is not news that work is underway to develop a more suitable model of price growth measurement that more accurately reflects the current environment.

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