August 2015 CPI Annual Inflation Rate Remains 0.2%

by Doug Short and Steven Hansen

According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was unchanged at 0.2%. The year-over-year core inflation (excludes energy and food) rate remained unchanged at 1.8%, and continues to be under the targets set by the Federal Reserve.

The market expected (from Bloomberg):

month over month change Consensus Range Consensus Actual CPI-U -0.2 % to 0.1 % +0.0 % -0.1 % CPI-U less food and energy 0.1 % to 0.2 % +0.2 % +0.1 %

As a generalization – inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy – and cannot be used as a economic indicator.

Energy (de)inflation was the major influences on this month’s CPI.

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 0.2 percent before seasonal adjustment.

The gasoline index declined sharply in August and was the main cause of the seasonally adjusted all items decrease. Other energy indexes were mixed, with the fuel oil index continuing to decline but the indexes for electricity and natural gas increasing in August. The food index rose 0.2 percent in August, with the indexes for eggs and for fruits and vegetables rising notably.

The index for all items less food and energy increased 0.1 percent in August, the same increase as in July. The index for shelter rose, as did the indexes for apparel, tobacco, and alcoholic beverages. However the index for airline fares declined sharply, and the indexes for household furnishings and operations, recreation, and used cars and trucks also decreased in August, with the indexes for new vehicles and medical care unchanged.

The all items index increased 0.2 percent for the 12 months ending August, the same increase as for the 12 months ending July. The 12-month change in the index for all items less food and energy also remained the same, at 1.8 percent for the 12 months ending August. The food index rose 1.6 percent over the last 12 months, while the energy index declined 15.0 percent.