The U.S. June CPI report beat assumptions
The U.S. June CPI report beat assumptions with gains of 0.1% headline and 0.3% for the core that rounded from three-digit increases of 0.059% and 0.294%. Analysts now have 6-month average price gains of 0.170% for the headline and 0.174% for the core. June price firmness, despite an expected energy price drop that has since been reversed, reflects a 1.1% apparel price surge after a three-month weak period, a 1.6% used car price pop after a four-month decline, and a firm 0.4% rise for medical care services. The Fed has sidestepped the use of "transitory" to describe y/y PCE core price weakness now that it's in easing mode, though these figures will likely climb toward the stronger y/y CPI core price gains through 2019, with support from cost pass-through of May's tariff increases. In July, analysts expect a 0.4% CPI headline gain with a 0.2% core price rise, as energy prices have rebounded. Analysts expect the y/y CPI gain to bounce to 1.9% from 1.6% in June, while the y/y core price gain remains at June's 2.1%. The headline y/y metric should climb to the 2% area by September if oil prices hold, and analysts assume y/y core price gains that remain above the Fed's 2.0% objective. For the PCE chain price figures, analysts expect a 0.1% June headline and a 0.3% core price rise, with a y/y PCE headline gain at May's 1.5% figure, and a core price rise 1.8% from 1.6% in April and May.