July 2017 Consumer Price Index

Inflation remained relatively level in July 2017 according to the Consumer Price Index (CPI) from the Bureau of Labor Statistics.  After being unchanged in June, this price proxy increased just 0.1 percent to start the second half of this year.  Compared to July of 2016, this index is 1.7 percent higher.  Core-CPI (which excludes food and energy) rose 0.1 percent, matching the uptick from each of the previous three months, and is also 1.7 percent higher than a year earlier.

Owning transportation is getting cheaper.  Vehicle costs continued declining.  New auto prices have dropped each month year-to-date except January and are currently 0.6 percent less than in July 2016.  Similarly, used vehicles have been lower every month in 2017 and have fallen 4.1 percent from a year earlier.  Additionally, gasoline costs held steady after declining 6.4 percent and 2.8 percent in May and June respectively. 

While several items fell or grew tepidly, a couple of important categories continue growing at faster than average rates.  Medical commodities rose 1.0 percent in the period and are up 3.7 percent from a year earlier.  Shelter continued its string of upticks and is 3.2 percent higher year-over-year.  While these are crucial items to Americans, they do not represent a large enough proportion in the index to push the overall tally significantly higher. 

CPI remains in its slowing trend.  Our central bank would prefer to see prices rise closer to 2.0 percent on an annual basis, a level which has been difficult to maintain in the current business cycle despite herculean efforts from the Federal Reserve.  Other inflation gauges suggest weakness could continue, possibly disrupting the central bank’s desired course of action.  For instance, the early stages of production within the Producer Price Index are not forecasting an abundance of inflation pressures ahead.  Perhaps more importantly, the Federal Reserve’s favorite measure of inflation, which Atlas wrote about here, remains well below the target trend.  For now, America’s central bankers are likely to continue moving away from their experimental monetary policy at a slower pace than was expected when this year got under way.