Inflation Cools Off, Pushing Real Wage Growth Back Into Positive Territory

CPI takes center stage on the data front Thursday.

The latest read on inflation comes on the heels of Friday’s hotter-than-expected average hourly earnings print. I suppose the worst possible scenario is that it (CPI) too comes in above estimates, heightening market concerns about a hawkish Fed and translating into real wage growth that’s even more negative than it was last month, when inflation-adjusted wage gains rose at a not-great-again rate of 0.2%.



Consensus is 0.2% MoM on core and generally speaking, it looks like Wall Street thinks the YoY print will edge back down to 2.3%.

In July, core moved up to 2.4% (YoY), the briskest pace in a decade.

Thursday’s data will be set against a backdrop of rising trade tensions and the prospect that the Trump administration could move ahead with tariffs on an additional $200 billion in Chinese goods.

Late last week, the President said duties on another $267 billion in items are “ready to go“. As a reminder, it will be impossible to avoid consumer items in the prospective next rounds of tariffs on China, which means any uptick in inflation ahead of the imposition of those duties will only add to inflation jitters in the U.S.



Consensus came in expecting the headline YoY print to tick back lower and while that same consensus saw core holding steady at 2.4% – some banks expected a tick lower there as well.

Estimates and priors

  • US CPI MoM, est. 0.3%, prior 0.2%
  • US CPI Ex Food and Energy MoM, est. 0.2%, prior 0.2%
  • US CPI YoY, est. 2.8%, prior 2.9%
  • US CPI Ex Food and Energy YoY, est. 2.4%, prior 2.4%
  • US CPI Index NSA, est. 252.4, prior 252
  • US CPI Core Index SA, est. 258.4, prior 257.9


  • CPI rose 0.2% vs est. 0.3%.
  • Forecast range from up 0.1% to up 0.4% from 72 estimates
  • Ex. food, energy m/m up 0.082%; est. 0.2%
    • Ex. food, energy y/y up 2.199%; est. 2.4%
  • CPI Y/y rose 2.7%; est. 2.8%

So clearly that’s a miss and it should help allay fears that the Fed will be pigeonholed further into hawkishness ahead of the next round of tariffs.

When you throw in Wednesday’s possibly good news on the trade front, this could play bullish for risk sentiment the extent it catalyzes a bit of dollar weakness. Spec positioning in the greenback is pretty stretched.



Oh, and when you do the math with the latest read on AHE, real wage growth is positive again.



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