Market 09/13: Disappointing CPI doesn't erase FED Pause scenario

Overview of August CPI report

Headline inflation up 3.7% year-over-year, slightly higher than the predicted 3.6%. This figure rose 0.6% from July - the largest monthly increase since June 2022.

Airline ticket prices saw a big change, rising 4.9%, after falling 8.1% in the previous two months. But the 10.6% rise from July in gasoline prices was the main driver of the entire CPI basket.

Core inflation up 0.3% from July (higher than the expected 0.2%) but only up 4.3% year-over-year (as expected).

Transportation beats housing prices for the first time, becoming the biggest driver in the core CPI rise. "Transportation CPI rising again will be a problem for stocks and bonds as it was the main reason inflation fell in recent months." - BBG

Housing inflation lowest since November 2022

Rent prices 7.76% higher than a year ago, down from 8.03% in July
Shelter prices (mortgage and rent) now only 7.27% higher year-over-year, down from 7.69% last month

FED's favorite inflation gauge - supercore CPI block up 0.53% in August and holding above 4% annually.

Inflation cooling in both goods and services heads:

Gasoline prices contribute over 50% of the growth to the overall CPI group this time:

In the core CPI block, housing growth accounts for up to 70% of the total block's growth at 7.3% annually.

Looking at the bright spot in the report, real average income after inflation rises for the 3rd straight month, after a 26-month decline streak.

U.S. household income falls for the 3rd straight year, putting pressure on shopping demand

The Census Bureau said the inflation-adjusted median household income of Americans fell to $74,580 in 2022, down 2.3% from the 2021 estimate of $76,330.

Consumer spending in August was generally stable. Per-household card spending rose 0.4% year-over-year and fell 0.2% from the previous month, after a strong 0.7% increase in July.

Gasoline price rise leads to surge in gasoline spending in August, up 6% from the previous month. Housing-related spending, such as furniture and home improvements, continues to trend down.

Credit card utilization trending up across all income groups. However, current utilization remains lower than levels seen in 2019.

Oil prices continue to hold high despite U.S. inventory build

Oil prices continue to hold near the highest levels since November 2022, pushed up by supply concerns as well as prospects of rising demand from OPEC's monthly report and Saudi Arabia's production cuts.

U.S. crude oil inventory data today: