CPI Inflation Comes In Soft In August; Futures Rise

The consumer price index undershot expectations in August, as CPI inflation eased off a 13-year high. The core inflation rate slipped to 4%, easing further from June’s 29-year high of 4.5%. Dow Jones futures turned positive in early Tuesday stock market action after the CPI report.


The CPI rose 0.3% from the prior month and 5.3% vs. a year ago, the Labor Department said Tuesday. The annual inflation rate dipped from the 5.4% rate in June and July, which was the highest since 2008. Wall Street economists expected a 0.4% monthly rise and 5.3% annual rate.

The core CPI, which strips out volatile food and energy categories, rose just 0.1% from July, vs. the 0.3% expected.

Supply constraints and high demand, fueled by vaccines and and fiscal stimulus, had combined to stir up the biggest broad-based inflation rise in a generation. Still, it’s too soon to know how much of the recent inflation pressure will prove transitory. Industries that are struggling to keep up with demand and facing increases in their own input costs, including labor and transportation costs, appear to be passing along price hikes.

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Dow Jones, Treasury Yields Reaction To CPI Report

Dow Jones futures rose about 0.4% after the CPI report. The Dow closed about 2% below a record high on Monday, up 14% for the year.

S&P 500 futures advanced 0.4% and Nasdaq 100 futures 0.2%. The S&P 500 is up 19% this year, while the Nasdaq composite has gained 17%.

The 10-year Treasury yield, near 1.35% before the CPI data, eased to around 1.34% after the report.

The next Fed meeting is on Sept. 21-22. A key question is whether policymakers will announce a tapering of asset purchases. Any actual tapering of bond buys likely wouldn’t begin for several months. Progress in the labor market will probably factor more into the Fed’s decision that incoming CPI data, though the benign August data could help soothe inflation concerns.

CPI Inflation Report Details

Prices for used cars and trucks, which had surged close to 30% in recent months, fell 1.5%.

Demand for used cars has gotten a boost amid the global chip shortage that has snagged production for new autos. But prices for new vehicles rose 1.2%, continuing recent strength.

Prices for food away from home rose 0.4% in August after July’s 0.8% increase, the biggest monthly gain in 30 years. Prices for food consumed at home also rose 0.4% last month.

Meanwhile, shelter prices rose 0.2% in August, as owner’s equivalent rent rose 0.3%. But prices for lodging away from home fell 2.9%, after surging 6% in July and 7% in June.


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