Consumer Price Index: Headline Bounces Back in August

The Bureau of Labor Statistics released the August CPI data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 1.06%, up from 0.84% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.34%, up from the previous month's 2.20%.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.1 percent before seasonal adjustment.

The seasonally adjusted increase in the all items index was caused by a rise in the index for all items less food and energy. It increased 0.3 percent in August, as the indexes for shelter and medical care advanced.

The energy and food indexes were both unchanged in August. Major energy component indexes were mixed, with increases in the indexes for natural gas and electricity offsetting declines in the gasoline and fuel oil indexes. The food at home index declined for the fourth month in a row, offsetting an increase in the index for food away from home. [More…]

Investing.com was looking for a 0.1% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.0% for Headline and 2.2% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

Headline and Core CPI since 2000

The next chart shows both series since 1957, which was the first time the government began tracking Core Inflation.

Headline and Core CPI

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is above the PCE target range of 2 percent.