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August Consumer Price Index: Year-over-Year Core Remains at 1.8%

September 16, 2015

by Doug Short

The Bureau of Labor Statistics released the August CPI data this morning. The year-over-year unadjusted Headline CPI came in at 0.20%, little changed from 0.17% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.83%, essentially unchanged from the previous month's 1.80%.

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) decreased 0.1 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 0.2 percent before seasonal adjustment.

The gasoline index declined sharply in August and was the main cause of the seasonally adjusted all items decrease. Other energy indexes were mixed, with the fuel oil index continuing to decline but the indexes for electricity and natural gas increasing in August. The food index rose 0.2 percent in August, with the indexes for eggs and for fruits and vegetables rising notably.

The index for all items less food and energy increased 0.1 percent in August, the same increase as in July. The index for shelter rose, as did the indexes for apparel, tobacco, and alcoholic beverages. However the index for airline fares declined sharply, and the indexes for household furnishings and operations, recreation, and used cars and trucks also decreased in August, with the indexes for new vehicles and medical care unchanged.

The all items index increased 0.2 percent for the 12 months ending August, the same increase as for the 12 months ending July. The 12-month change in the index for all items less food and energy also remained the same, at 1.8 percent for the 12 months ending August. The food index rose 1.6 percent over the last 12 months, while the energy index declined 15.0 percent. [More…] was looking for a 0.2% increase in both the seasonally adjusted Headline and Core CPI. Year-over-year forecasts were 0.2% for Headline and 1.8% 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 remains below the PCE target range of 2 percent.