James Knightley, chief international economist at ING, points out that the US headline inflation was flat on the month versus expectations of a 0.1% month on month gain, which leaves the annual rate of inflation at 1.7%.
“Meanwhile core inflation, which strips out volatile food and energy products and services, also undershot. It rose 0.1%MoM – the weakest rise for four months, leaving the annual rate of core CPI at 2.4%. This is important because there had been some concern that inflation pressures were starting to build following three consecutive 0.3%MoM increases. If the pick-up had continued it could have been perceived as a constraint on potential future Fed stimulus.”
“Looking at the details energy was a drag given the declines in gasoline prices, but there was also a big fall in used car prices (-1.6%MoM) and apparel prices fell 0.4% – the first decline since April. Medical care costs also showed a slower rate of inflation, but the shelter component remains firm, rising 0.3%.”