Headline and core y/y CPI inflation undershoots slightly Bloomberg consensus (by 0.1%) (and below Cleveland Fed nowcast for headline of 0.4% m/m, see yesterday’s post). Overall, trend is down even if headline y/y is ticks up slightly.

Figure 1: Annualized CPI inflation, year-on-year (bold black), quarter-on-quarter (tan), month-on-month (green), and instantaneous per Eeckhout, T=12, a=4 (bold red). Source: BLS, and author’s calculations.

As discussed in Justin Ho’s Marketplace piece yesterday, the year-on-year calculation doesn’t show everything. In particular, q/q and m/m are down, as is the Instantaneous inflation measure (essentially a weighted average with higher weights on recent m/m inflation).

On a month-to-month basis, other measures that attempt to get at trend inflation are also down, including the Cleveland Fed’s Trimmed and Median CPI rates. The Atlanta Fed’s stick price measure showed a slight uptick.

Figure 2: Annualized month-on-month headline CPI inflation (bold black), core (bold tan) sticky price (green), 16% trimmed (pink), instantaneous per Eeckhout, T=12, a=4 (bold red). Source: BLS, Atlanta Fed, Cleveland Fed, and author’s calculations.

Overall, this release seems largely in line with expectations. The wild card (short term) is likely energy.

Gasoline prices are not likely to fall substantially, so that downward pressure on headline inflation is no longer present.

Update, 8/10/23 noon PT:

CEA Chair Jared Bernstein makes the same note.

Update, 8/10/23, 1pm PT:

And here’s a modified version of Figure 2, with Pawel Skrzypzcynski’s core svcs ex-shelter inflation rate (m/m).

Figure 3: Annualized month-on-month headline CPI inflation (bold black), core (bold tan), and core services ex-shelter (bold light green). Source: BLS,  Pawel Skrzypczynski, and author’s calculations.

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