Consumer Inflation Has a Pulse

In its report this morning, the BLS announced that, in August, the Consumer Price Index rose by 0.4% versus a forecast of 0.3% and that took the year-over-year rate to 1.3% from July’s 1%. Analysts were forecasting the twelve-month rate to only reach 1.2%. Without food and energy, core CPI rose by 0.4% and that was twice the estimated gain. Year-over-year, the core rate moved to 1.7% from 1.6%; about in line with estimates. The Fed wants to see some inflation and at least this report is a sign that price levels are moving in the desired direction. For now.

The same report also told us that, adjusted for inflation, Real Average Hourly Earnings rose by 3.3% last month and that was a comedown from July’s 3.7%. Real Average Weekly Earnings rose by 3.9%, also less than July’s revised 4.2%. Still not bad wage growth for an economy in a recession, but we know what’s behind that story.

Treasury prices seem little affected by the report and the Ten-Year is still yielding around 68 basis points with the Long Bond just a nudge over 1.40%. Crude oil is barely hanging on to $37 with gold little changed at around $1,943.