U.S. consumer prices likely stalled in August

The Bureau of Labor Statistics (BLS) canvass of consumer goods and services prices will provide a final look at retail inflation before the Federal Open Market Committee (FOMC) begins their two-day deliberations on September 16-17. Capped by lower energy and core commodities costs, the Consumer Price Index (CPI) likely remained unchanged in August, ending a string of monthly increases going back to February. 

The continuing tug of war between increases in non-energy services costs and modest reductions in core commodities quotes probably left the core CPI just 0.1% higher for a second straight month. The gap between the year-to-year growth rates of the overall and core CPIs is expected to remain wide during the reference period. Overall consumer prices likely climbed 0.2% above the level prevailing in August 2014, while the 12-month advance of the ex-food-and-energy gauge probably clocked in at 1.8%. 

Looking ahead, recent declines in gasoline pump prices are projected to be a significant drag on headline inflation in the BLS' September report. 

The Consumer Price Index (CPI) is expected to hold steady in August, ending a run of six straight increases. Softer retail quotes for energy products, combined with yet another modest dip in core commodities prices, probably neutralized upticks in food and non-energy services costs last month (see table, below). Reflecting a projected 3.5% decline in seasonally adjusted gasoline pump prices, the CPI energy gauge likely fell by 1.6%, retracing a little over one quarter of the 6.2% hike posted over the May-July span. Echoing the reported uptick in wholesale quotes, the CPI food measure probably edged just 0.2% higher during the reference period, a touch above the average rise posted over the prior 12 months. Sans the aforementioned movements in retail food and energy costs, the core CPI likely climbed 0.1% higher (0.095% unrounded) for a second straight month. We expect the details of the Bureau of Labor Statistics' report to reveal that lower prices for airline tickets, apparel and autos moderated anticipated increases in medical care and shelter costs. 

"Our forecasts would leave the year-to-year growth rates of the overall and core CPIs at 0.2% and 1.8%, respectively," commented Societe Generale.
"We expect monetary policymakers to look view upcoming headline consumer inflation readings as the products of temporary falloffs in petroleum-based energy costs, however. As a result, near-term inflation soundings probably will not be impediments to an initial liftoff in administered rates at this week's FOMC meeting."