July CPI: Do You Believe in Miracles?

CPI came in this morning at 0% with core CPI at 0.3%. The YoY is 8.5% and 5.9%. It was obvious with gas coming down that CPI would be lower than last month. But the drop in core from 0.7% to 0.3%? Hmmmmm.

This is what I’ve been following. This is CPI broken down in two pieces: Transportation (aka gas and used car prices) and everything else.

You can see there was a big drop in the transportation contribution, but everything else YoY continues to push higher.

More generally, it’s hard for me to imagine that CPI is going to come down much under 4% when wages are doing this:

Overall, this report was about as expected but Core seemed to come in a bit light. Rents for sure continue to grow rapidly. We’ll see in the coming months what happens, but my believe is core will stay between 0.3% and 0.5%.