Consumer Price Index: July Headline At 1.81%

The Bureau of Labor Statistics released the July Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 1.81%, up from 1.65% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.21%, up from the previous month's 2.13% and above the Fed's 2% PCE target.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in July on a seasonally adjusted basis after rising 0.1 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment.

Increases in the indexes for gasoline and shelter were the major factors in the seasonally adjusted all items monthly increase. The energy index rose in July as the gasoline and electricity indexes increased, though the natural gas index declined. The index for food was unchanged for the second month in a row, as a decline in the food at home index was offset by an increase in the food away from home index.

The index for all items less food and energy rose 0.3 in July, the same increase as in June. The July rise was broad-based, with increases in the indexes for shelter, medical care, airline fares, household furnishings and operations, apparel, and personal care all contributing to the increase. The index for new vehicles was one of the few to decline in July.

The all items index increased 1.8 percent for the 12 months ending July, a larger increase than the 1.6-percent rise for the period ending June. The index for all items less food and energy rose 2.2 percent over the last 12 months, slightly more than the 2.1-percent increase for the period ending June. The food index rose 1.8 percent over the last year while the energy index declined 2.0 percent. [More…]

Investing.com was looking for 0.3% MoM change in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.7% for Headline and 2.1% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

(Click on image to enlarge)

The next chart shows both series since 1957, the year the government first began tracking Core Inflation.

(Click on image to enlarge)

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is now at the PCE target range of 2 percent.