June CPI: More Convincing Progress Underway

Economics Group of Wells Fargo Bank, N.A. Summary Today’s report on the Consumer Price Index for June brought good news. Headline consumer price inflation increased 0.2% over the month and 3.0% over the past year. For the latter, this was the lowest reading since March 2021. Excluding food and energy prices, the core CPI increased 0.2% (rounded up from 0.16%) over the month, the smallest monthly increase in core inflation since February 2021. A big decline in prices for travel services such as airfares and lodging-away-from-home contributed to the deceleration in core prices, as did the ongoing slowdown in primary shelter inflation. Used vehicle prices declined 0.5%, new vehicle prices rounded flat, and goods prices excluding vehicles fell 0.1%. In the near term, we expect the more moderate pace of price growth signaled by the June CPI to continue. While the sharp drop in travel prices will be hard to repeat, the decline in vehicle prices has more room to run, and the ongoing disinflation in primary shelter should continue into the second half of this year. More broadly, the expanding supply side of the economy and slowing demand growth are helping to slow inflation from the blistering rates seen in 2021 and 2022. That said, core CPI inflation is still up 4.8% over the past year and 4.1% annualized over the past three months. The FOMC will need to see several more inflation prints like today’s before it declares its mission accomplished. READ FULL ARTICLE >>