Discussion on the inflation situation through August CPI and PPI data – Part 1

August CPI and PPI data released last week indicates that inflation is not fully under control. In fact, the cooling of CPI and PPI may come from falling energy prices while FED's monetary policies have not had much effect on these inflation indicators. This week, Viet Hustler will bring to readers discussions on the current inflation situation through 2 macroeconomic articles:

Part 1: Summary of the overall picture and direction of inflation shift + discussion on inflation psychology

Part 2: Impact of CPI and PPI data on money market and forex, as well as market expectations for the FOMC meeting next week.

Part 2 will be posted this Sunday.  

Overall inflation data picture in August

CPI data summary

Inflation not under control - CPI growth still higher than expected in all aspects: including headline CPI or core CPI, calculated by monthly or yearly growth rates.

Inflation still higher than market expectations and forecasts

• Headline inflation: 8.3% y/y (forecast:8.0 y/y), quite high given the context of significantly reduced energy prices compared to June.

• Core inflation: 6.3% y/y (vs forecast 6.0%)

The clearest signs of inflation not being under control and gradually shifting from energy to other items are shown through monthly CPI growth:

• Headline CPI: +0.12% m/m (forecast: -0.1%)

• Core CPI: +0.57% (forecast: +0.3%)

• Of which, energy fell 0.44% m/m - the main reason keeping headline CPI m/m growth low.

• Items services and food are the items with the highest price increases in August.

  

In particular: most previous inflation-driving items like energy, transportation prices, or used car prices are trending downward in prior surveys.

Of which: