US inflation cooled more than expected

The data...

US consumer prices fell by 0.1% in June compared to the previous month. The year-on-year rate fell from 3.3% to 3.0%. The more important core rate, which excludes the volatile prices for energy and food, was down to a monthly rate of +0.1%. The year-on-year rate fell here from 3.4% to 3.3%. The consensus expectation and our estimate for the month-on-month rates were +0.1% (headline) and +0.2% (core).

... and the background

After consumer prices rose surprisingly sharply in the first three months of the year, inflationary pressure eased again faster than expected in the second quarter. Moreover, this applies not only to the headline rate consumer prices, which actually fell slightly in June compared to May due to cheaper gasoline. Rather, the core rate, which is more meaningful for the trend and excludes volatile prices for energy and food, has also eased noticeably.

The Fed is aiming for the deflator for personal consumption expenditures (PCE) to increase at an annual rate of 2%, which corresponds to around 2.4% for consumer prices and thus 0.2% in month-on-month terms. Most recently, underlying inflation was thus in line with the Fed's target.

The question is to what extent the latest good figures will prove to be outliers similar to the inflation surge in the first quarter. In fact, the May and June figures should not simply be extrapolated, as some prices known for their strong fluctuations have surprised on the downside, such as air travel (-5% compared to the previous month), hotel accommodation (-2.5%) and used cars (-1.5%) in June. However, price increases for housing services, the most important expenditure item, have also slowed noticeably, and movements here are normally small. Overall, inflation should therefore continue to decrease.

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