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 Declined 0.2% in August
Posted Under: CPI • Data Watch • Inflation
Supporting Image for Blog Post

 
Implications: Yellen and the doves could not have asked for a better inflation report for the day of their FOMC statement. After rising for 15 consecutive months, consumer prices took a breather in August, declining 0.2%. However, all of the drop was due to energy and one month by itself does not make a trend. So although today's report comes as welcome news to the doves, we do not believe it will change the Fed's plans for continued tapering, which will be announced later this afternoon. America's booming energy production continues to subdue the rise in consumer prices. The index for energy declined 2.6% in August, led by a 4.1% decline in the cost of gasoline, which subtracted 0.3% from the overall index. Core prices, which exclude food and energy, were unchanged in August, the first time that the core index has failed to show an increase since late 2010. Despite the August data, since the start of 2014, consumer prices are up 1.8% at an annual rate versus the 1.5% pace in first eight months of 2013. Owners' equivalent rent, which makes up about ¼ of the overall CPI, rose 0.2% in August, is up 2.7% over the past year, and 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 best news in today's report was that "real" (inflation-adjusted) average hourly earnings rose 0.4% in August, the largest monthly gain in over a year. Plugging today's CPI data into our models suggests the Fed's preferred measure of inflation, the PCE deflator, probably declined 0.1% in August. If so, it would be up 1.4% from a year ago, still below the Fed's target of 2%. We expect this measure to hit and cross the 2% target later this year or very early next year, consistent with our view that the Fed starts raising short-term interest rates in the first half of 2015. In other news this morning, the NAHB index, which measures confidence among home builders, rose three points to 59 in September, the best reading in nine years. Looks like a broad pick-up in both sales and foot traffic around the country.

Click here for PDF version

Posted on Wednesday, September 17, 2014 @ 11:08 AM • 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.