Consumer Inflation Rose More Than Expected in July

In a follow-up to yesterday’s Producer Price Index report, the BLS reported this morning that consumer inflation was also an upside surprise. In July, the Consumer Price Index rose by 0.6%, the same as in June, but more than the 0.3% that analysts predicted. Year-over-year, that helped move the twelve-month rate to 1.0% versus an expectation of just 0.7%. Without food and energy, core CPI also rose by 0.6% last month; a big beat over the 0.2% forecast. Year-over-year, the core rate moved to 1.6% from 1.2% beating expectations of a rise to just 1.1%. Inflation-adjusted Real Average Hourly earnings rose by 3.7% with Real Average Weekly earnings posting a 4.3% growth rate. Both are slightly below June’s pace.

Earlier today, the Mortgage Bankers Association reported that, for the week ending August 7th, new Mortgage Applications rose by 6.8% after declining the prior two weeks.

Bond prices continue to slip as an almost half-point sell-off in the Ten-Year has pushed that yield up to about 68 basis points. The Treasury is selling $38B Ten-Year notes today and $26B Thirty-Year bonds tomorrow and this week’s supply may be contributing to the long-end’s sell-off and the resulting steepening of the yield curve. The yield on the Thirty-Year is sneaking up on 1.40%. Gold is coming back after yesterday’s hard sell-off and this morning’s $20 gain so far has pushed the price to $1,933. Crude oil is up about a half-dollar to $42.20 and equity futures point to a big, green opening.