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 0.1% in August
Posted Under: CPI • Data Watch • Government • Inflation • Fed Reserve
Supporting Image for Blog Post

 
Implications: The final inflation report heading into today's Fed meeting went off with a wimper, not a bang. Headline prices declined 0.1%, but all of the decline (and then some) was due to energy prices, which declined 2% in August and are down 15.0% in the past year. Excluding energy, consumer prices rose 0.1% in August and are up 1.8% in the past year. And while overall inflation is up a mere 0.2% in the past year, prices have risen 2.3% at an annual rate over the past six months. Core prices, which remove the volatile food and energy components, continue to hover around 2% inflation from a year ago, very close to the Fed's inflation target. So regardless of the outcome of tomorrow's decision, inflation should eventually put pressure on the Fed to raise rates faster than the market expects. Core consumer prices in August were led higher by housing. Owners' equivalent rent, which makes up about ¼ of the CPI, rose 0.2% in August, is up 3% in the past year, up at a 3.5% annual rate in the past three months, and will be a key source of higher inflation in the year ahead. While some scaremongers warn about deflation, others stoke fears of hyperinflation. But the truth is that neither is a threat at present. What we have is low inflation that is likely to gradually work it's way upward over the next few years. On the earnings front, "real" (inflation-adjusted) average hourly earnings rose 0.5% in August, and are up a modest 2.0% in the past year. In other words, increases in consumer spending have been driven by higher earnings, not consumers loading up on debt. Taken as a whole, recent trends in both consumer and producer prices, paired with solid employment growth and a 5.1% unemployment rate, suggest the Fed has solid grounds to announce the start to rate hikes in tomorrow's statement.

Click here for PDF version
Posted on Wednesday, September 16, 2015 @ 10:29 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 © 2023 All rights reserved.