Goldman Sachs: US CPI - FJElite

Core CPI increased by 0.22% in July, roughly in line with expectations. On the firmer side, the OER and rent categories rebounded to 0.26% month-over-month, somewhat above our estimate of their underlying trends, boosting the core by 9bp and 3bp, respectively. Medical services prices were also firmer than expected, increasing by 0.6% month-over-month and boosting the core by 5bp. The communication categories also increased by 0.6% month-over-month, boosting the core by 2bp and likely reflecting recently announced price hikes on consumer electronics, but software and accessories prices, which have a much larger weight in core PCE than core CPI, were softer and increased by 0.5% month-over-month. On the softer side, hotel prices declined by 3.3%, reflecting the continued reversal of the boost from the World Cup—which had already begun to show up in June’s report, as prices are measured at the time of booking—weighing on the core by 5bp. Headline CPI increased by +0.07% month-over-month, also in line with expectations, reflecting the second consecutive monthly decline in energy prices (-1.5%).

Based on details in the CPI report, we estimate that the core PCE price index rose 0.23% in July (vs. our expectation of 0.26% before the CPI release), corresponding to a year-over-year rate of +3.27%. Additionally, we expect that the headline PCE price index increased 0.13% in July, and increased 3.63% from a year earlier. We estimate that market-based core PCE rose 0.09% in July.