Hooray? The BLS released the July CPI report and many are cheering the report but we’re not sure why? From the BLS:
CONSUMER PRICE INDEX - JULY 2024
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis, after declining 0.1 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment.
The index for shelter rose 0.4 percent in July, accounting for nearly 90 percent of the monthly increase in the all items index. The energy index was unchanged over the month, after declining in the two preceding months. The index for food increased 0.2 percent in July, as it did in June. The food away from home index rose 0.2 percent over the month, and the food at home index increased 0.1 percent.
The index for all items less food and energy rose 0.2 percent in July, after rising 0.1 percent the preceding month. Indexes which increased in July include shelter, motor vehicle insurance, household furnishings and operations, education, recreation, and personal care. The indexes for used cars and trucks, medical care, airline fares, and apparel were among those that decreased over the month.
The all items index rose 2.9 percent for the 12 months ending July, the smallest 12-month increase since March 2021. The all items less food and energy index rose 3.2 percent over the last 12 months and was the smallest 12-month increase in that index since April 2021. The energy index increased 1.1 percent for the 12 months ending July. The food index increased 2.2 percent over the last year.
I don’t think anything in this report is good news. A large part of the inflation reprieve has been stable energy prices but with the Middle East potentially cascading into a full out war there is high risk that stable energy prices won’t last long.
Housing continues to be a core issue and cutting rates won’t fix that problem, it will exacerbate it. We have taken a small position on IWM just in case the Fed aggressively cuts but if they do that, expect inflation to explode again.
Stay tuned, stay profitable and stay solvent…