Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  The Consumer Price Index (CPI) Increased 0.3% in June
Posted Under: CPI • Data Watch • Inflation
Supporting Image for Blog Post

 
Implications: In her last press conference, Janet Yellen said recent higher inflation readings weren't a problem because the data are "noisy." But, lately, that noise all seems to be coming from the direction of higher inflation. Consumer prices increased 0.3% in June, following a large 0.4% rise in May. Although consumer prices are up a moderate 2.1% from a year ago, this year-over-year number masks a real acceleration. Over the past three months, the CPI is up 3.5% at an annual rate. And if you think three months is just noise, how about the first half of the year? In the first six months of 2014, consumer prices are up 2.7% at an annual rate, a clear acceleration from the 1.5% rate seen through the first six months of 2013. Energy led the way in June, with gasoline prices, up 3.3%, accounting for two-thirds of the increase in the overall index. And while a 0.1% increase in "core" prices in June means core prices are up only 1.9% from a year ago, they are still up an annualized 2.5% in the past three months. In addition, owners' equivalent rent (the government's estimate of what homeowners would charge themselves for rent), which makes up about ¼ of the overall CPI, is up 2.6% over the past 12 months. This measure will be a key source of the acceleration in inflation in the year ahead, in large part fueled by the shift toward renting rather than owning. The worst news in today's report was that "real" (inflation-adjusted) average hourly earnings remained flat in June and are down 0.1% in the past year. Plugging today's CPI data into our models suggests the Fed's preferred measure of inflation, the PCE deflator, probably increased 0.2% in June. If so, it would be up 1.7% from a year ago, barely below the Fed's target of 2%. We expect to hit and cross the 2% target later this year, consistent with our view that the Fed starts raising short-term interest rates in the first half of 2015.

Click here for a PDF version
Posted on Tuesday, July 22, 2014 @ 1:11 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.