- The Consumer Price Index for July rose .8% versus estimates of a .4% gain and a 1.1% increase in June.
- The CPI Ex Food & Energy for July rose .3% versus estimates of a .3% gain and a .3% increase in June.
- Initial Jobless Claims for this week fell to 450K versus estimates of 435K and 460K the prior week.
- Continuing Claims rose to 3417K versus estimates of 3310K and 3303K prior.
BOTTOM LINE: US consumer prices rose more than expected in July, Bloomberg reported. Energy expenses jumped 4% versus a 6.6% gain in Jun. Gasoline prices rose 4.1% during the month. Food prices gained .9% versus a .8% increase in June. Commodity costs have fallen substantially since early July, indicating the rise in total consumer prices will slow. Crude oil futures fell as low as $112/bbl. this week after hitting $147 last month. Regular grade gasoline, which hit a record $4.11 on July 17th, has declined about 8%, according to AAA. The S&P Goldman Agricultural Commodity Index is down 14.1% since June 26th. Rents, which make up almost 40% of the core CPI, rose .1% versus a .3% increase in June. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 3 basis points to 2.18% on today’s news. This is still down 45 basis points since July 7th and at the lowest level since October 2003. The growth rate of the ECRI future inflation gauge is currently -8.4%. I expect the headline CPI to begin to show meaningful deceleration next month and I still believe inflation fears have peaked for the intermediate-term.
Fewer Americans filed initial jobless claims this week, Bloomberg reported. Claims in the last few weeks have been pushed higher by a government bill that extended benefits. The impact of this legislation has not been quantified by the government, a Labor spokesman said. The four-week moving average of first-time claims rose to 440,500. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 2.6% from 2.5% the prior week. This is still below the long-term average of 2.9% and well below the all-time high of 7.0% reached in May 1975. 18 states and territories showed a decrease in jobless claims. I expect jobless claims to begin trending lower again by no later than next month. The US Dollar Index is rising another .22% on today's news.
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