US inflation cools further

The data...

US consumer prices rose by 0.2% in July compared to the previous month. The year-on-year rate fell from 3.0% to 2.9%. The more important core rate, which excludes the volatile prices for energy and food, printed 0.2%, too. The year-on-year rate fell here from 3.3% to 3.2%. The report was therefore in line with consensus expectations and our forecast.

... and the background

The consumer price data for July was almost exactly in line with our forecast. In our preview, we pointed out that although the general expectation of a month-on-month rate of 0.2% was realistic, the data would probably only just round higher to 0.2%. In fact, the month-on-month rates were 0.15% (headline) and 0.17% (core rate). This continues the string of favorable inflation reports. Over the last three months, consumer prices have risen at an annual rate of only 0.4%, excluding energy and food by 1.6%.

The only weak point in the report is that the typically highly volatile (and therefore uninformative) prices, such as those for used cars and airline tickets, have significantly dampened price increases, while rent increases, which are actually quite stable, have again contributed somewhat more to inflation. However, rental inflation remains on a downward trend. Inflationary pressure should therefore tend to decrease further in the coming months.

For full text see attached PDF-Version.