Phew. We squeaked by. I guess.
Core inflation across the US economy ran 0.346% in August, a beleaguered BLS said Thursday. That was in line with consensus. Barely. Another hundredth or two worth of upside on that oh-so-crucial unrounded print could’ve set markets to fretting.
There’s a lot absurd about that assessment, true though it may be. Is there really anything more concerning about, say, 0.368% than 0.346%? Or anything less concerning about, for example, 0.321%? We’re quibbling over fractions of a percentage point, and around mis-measured data besides. C’est la vie.
As the figure below shows, the monthly pace of underlying inflation last month was the second-quickest since March of 2024. The YoY pace, at 3.1%, matched consensus, but remains more than a full percentage point above the Fed’s target, with allowances for the fact that the Fed doesn’t actually target core CPI.
The headline, all-items gauge posted a 0.382% MoM advance. The 12-month rate was 2.9%.
The breakdown wasn’t especially encouraging. Grocery prices, for example, rose 0.6% MoM, the fastest since August of 2022. The gas gauge posted its largest monthly increase of the year, a 1.9% uptick. Rounding out the indexes covering necessities, the shelter gauge rose 0.4% which counted as — you guessed it — the briskest MoM print of 2025. (Unrounded, the shelter index rose the most since last summer.)
It was largely the same story across categories. The apparel gauge, for example, rose 0.5%, the most since February. Both new and used vehicle prices rose the most in months. Transportation services notched a 1% MoM increase, the quickest since January. And on and on. Indeed, only a “few” (to use the BLS’s word) major indexes posted a decline for August.
With the caveat that beauty’s in the eye of the beholder, this was not an attractive inflation report. But, circling back, it’ll suffice. We squeaked by.
How can I say that? Well, because the two measures markets cared about — the CPI-derived version of the “supercore” services metric the Fed monitors in the PCE series and core goods, which traders are watching for evidence of tariff pass-through — were benign.
Stripping out shelter, core services price growth was 0.23% in August, less than half the prior month’s pace. And core goods rose 0.28%, up from July’s pace, but still not indicative of acute upward pressure from tariffs. (Stripping out new and used cars, that print was even cooler.)
Make of it what you will. Fed doves and, likely, stock jockeys, will claim this counts as good news. I simply don’t see it that way.
I enjoy reading contrary headlines on the implications of the release. NYTimes “inflation accelerated and Fed will be cautious” to WSJ inflation picked up as expected to Bloomberg tame inflation report.
God help us.
This level of inflation is like “death by a thousand cuts” for anyone trying to work hard to get ahead, improve their standard of living, save money to buy a house, etc.
Exactly. There’s no way someone living on the median annual income in America can afford to live a “median” life in 2025. I spent more than $30,000 last month on home improvements and medical bills, and all I got was a master shower remodel, new tile in a guest bathroom, some extra gutter-ing around a back deck, a bonus room painted and two CT scans which cost me thousands despite having the absolute best insurance plan BCBS offers in my primary residence state. The shower’s nice, but exactly none of the rest of that stuff counts as “luxury” and most of it was necessary. The truth is, if you want to rest easy in America today, you have to have six figures in actual, liquid cash (not counting retirement funds, not counting home equity, but rather cold, hard, readily-available cash) that you’re ready, willing and able to deploy whenever and wherever it’s necessary. That’s an absurd ask for the vast majority of households.
Yeah, I have no idea how the average household gets by. Granted, I live in an expensive area, but any time one of my kids has to go to the emergency room (or even urgent care), those medical bills pile up fast. We are very fortunate to have a well funded HSA, but I imagine most Americans do not.
As I mentioned yesterday, good ole Uncle Larry (Ellison) made enough in one day to pay the annual median income of 1% of all the households in America and wouldn’t even move down one spot on the list of world’s richest people if he gave every dime of those gains away.
Again I ask, what the hell are we even doing?
And that’s why we DIY . . . going out for dinner is expensive, might as well spend your evenings working on the house.
My kids are discouraged. All are hard working and living in a financially responsible way. Delaying gratification. It is still hard for them to imagine being able to afford a life similar to what they grew up in (upper middle class).
Hope your CT scans were positive news.
It’s not a phenomenon exclusive to the US. Most comparable advanced countries are in the same boat – the difference is only in the degree of wealth disparity, which ranges from bad to worse.
Market reaction to macro . . . we are clearly in a “bad news is good news” environment. Specifically, higher joblessness = good news. And call me a rosy-cheeked optimist, but I think we have plenty more “good news” of that sort to come.