US Inflation Data for July is a surprise – Here's what the US CPI looks like!

Important Highlights:

• The U.S. Bureau of Labor Statistics released the latest US inflation data, revealing a 3.2% surge in the consumer price index for July compared to the previous year.  

• Although the annual rate of US CPI fell short of predictions, it represented a rise from the 3% recorded in June.  

• Notably, the predominant driver of the monthly inflation upswing was attributed to shelter costs, which saw a 0.4% increase, translating to a significant 7.7% surge year-on-year.  

• In the realm of economic analysis, experts are underlining that the looming concern of “jumping oil prices” poses a notable threat to the achievement of the Federal Reserves 2% inflation target. 

In a heartening turn of events, the annual inflation rate based on US Inflation Data experienced a more gradual ascent than initially projected for the month of July, as indicated by the US Consumer Price Index (CPI) trends. This development brings relief to consumers who have been contending with surging expenses. Nonetheless, a substantial portion of the American population continues to grapple with the impact of unavoidable outlays, particularly pertaining to housing and energy. As disclosed by the U.S.  

Bureau of Labor Statistics, the consumer price index witnessed a modest uptick of 0.2% within the month, resulting in a 3.2% rise compared to the same period last year. While the recent annual inflation rate falls short of anticipated levels, it does signify a notable upswing from the preceding month's 3%.

Commenting on the latest US Inflation Data, Eugenio Aleman, the chief economist at Raymond James, remarked that July‘s CPI report surpassed expectations. However, the notable concern lies in the resilience of ’shelter costs which continue to exhibit strength. 

The US Consumer Price Index (CPI) serves as a crucial indicator of inflation, gauging the average fluctuations in prices of goods and services over time. While the annual inflation for July surpassed that of June, there was a significant decline compared to the staggering 8.5% recorded a year ago. 

The predominant driver behind the monthly increase in inflation is attributed to escalating ‘shelter costs’, marking a 0.4% uptick and a 7.7% rise in comparison to the previous year. Eugenio Aleman expressed his anticipation of a substantial weakening in shelter costs, yet such a scenario has not yet unfolded. 

Despite a surge in oil prices, the month of July witnessed a mere 0.1% rise in energy prices, and a 0.2% increase in food prices, according to the data from the relevant bureau. Encouragingly, there was a respite for consumers as the prices of used vehicles experienced a 1.3% reduction, and medical care services saw a decline of 0.4%. Aleman regarded this as positive news for consumers.

Source: CNBC 

Treasury Yields Rise as US Inflation Data Matches Expectations 

U.S. Treasury yields went up on Thursday after new information revealed that inflation in the U.S. increased only a little in July. This was as expected by experts. Additionally, the U.S. Treasury Department faced weak demand for its sale of 30-year bonds.  

The cost of renting homes went up, but this increase was balanced out by lower prices for items like cars and furniture. In July, both overall and core consumer prices rose by 0.2%. This led to a yearly increase of 3.2% and 4.7% for overall and core prices, respectively.

Guy LeBas, a financial expert, shared that this recent inflation report is positive. However, individual reports on inflation haven‘t strongly affected the market in the past few months. LeBas believes that the time of significant inflation is over, and this should influence the decision to raise interest rates. The US Federal Reserve is not expected to raise interest rates much longer, since inflation is closer to the central bank’s 2% target. 

Some traders thought the inflation data might not be as significant as predicted, so yields on government bonds fell. In spite of this, the yields went up afterward due to a soft demand for 30-year debt by the US Treasury. These bonds were sold at a high yield of 4.189%, slightly higher than before the auction. Demand for these bonds was lower compared to previous months. The Treasury had successful sales of shorter-term notes earlier this week. 

The benchmark 10-year yields increased by 8 basis points on that day, reaching 4.082%. They had reached a higher point on the previous Friday. Two-year yields also went up by 2 basis points to 4.821%. These yields had dropped from a high point in July. The difference in yields between the two-year and 10-year Treasury bonds, which is closely observed by experts, became slightly smaller.

US CPI data moderately raises Dollar and Shares! 

Global stocks and the dollar rose as US inflation slowed in July. This suggests the Federal Reserve may finish raising interest rates. However, caution remains as more data is expected before the next policy meeting. The US Consumer Price Index (CPI) increased by 0.2% last month, bringing the yearly inflation rate to 3.2%. Core CPI, excluding volatile food and energy prices, decreased slightly to 4.7% in July. Factors like travel costs and car prices have shown signs of slowing, seen as positive for the Fed.  

Though inflation peaked at 9.1% in June 2022, traders bet the Fed might not raise rates further if it approaches the 2% target. However, investors remain cautious due to upcoming inflation and job-related data before the September meeting. Initial gains in stock indexes and easing Treasury yields were driven by European gains.  

The Dow Jones, S&P 500, and Nasdaq Composite all rose slightly. Uncertainties exist as elements that may keep inflation relatively high, but the US dollar stayed supported due to the strong US economy. Oil prices dropped, gold prices rose slightly, and speculation grew that the Fed may not increase rates based on the latest inflation data. 

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Disclaimer: This post is from Aximdaily and it is considered a marketing publication and does not constitute investment advice or research. Its content represents the general views of our editors and does not consider individual readers personal circumstances, investment experience, or current financial situation.