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The July CPI rose 0.8%, twice the increase that most analysts had expected. The core rate of inflation was 0.3% in July, slightly above the 0.2% increase that was anticipated. Y-on-y the all items index is up 5.6%, the largest 12-month increase since January 1991. Y-on-y the core index increased 2.5%.

Energy and food prices continued to drive the headline inflation number higher. Energy prices rose 4% in July on a 4.1% increase in gasoline prices and a 7.4% increase in natural gas prices. Food prices rose 0.9% overall but food consumed at home rose 1.2% as meat, dairy, cereal prices and fruit and vegetable prices all rose over 1%.

The core rate of inflation rose 0.3% for the second month in a row. Core commodity prices rose 0.5%, its largest gain since 1999, as apparel prices rose 1.2%, new vehicle prices rose 0.2%, educational books and supplies rose 0.8%, and tobacco products rose 1.2%. Core services rose 0.3% as rent increased 0.3% and lodging away from home rose 0.7% but the heavily weighted owners equivalent rent rose only 0.1% in July after a 0.3% increase in June. The cost of health care services rose 0.2% in July, its smallest gain in 3 months but tuition increases were up 0.4% and public transportation costs continued to rise on higher fuel prices, up 1.1% for the month. Airline fares were the largest contributor to that increase, up 1.3% in July and up 20% over the past year.

There continues to be a dichotomy between goods and services prices. Despite a 0.5% increase this month, core commodities prices are up only 0.6% for the year while core services prices have increased 3.3%. If today’s increase in the core goods prices are an indicator of a feed through of higher import prices or the costs of materials, those could continue to put upward pressure on the core rate of inflation. However, tobacco price increases are unlikely to continue at the current pace and with a weak economy, apparel and auto price increases are likely to be reversed.

July Headline CPI is expected to increase 0.4% following a 1.1% June increase. Core CPI is expected to increase 0.2% after a 0.3% gain prior. Y-o-Y Headline CPI is expected to grow marginally to 5.1% and Core CPI is expected to be unchanged at 2.4%.

Energy prices are once again expected to be the main contributing factor to the expected increase, though this impact will be considerably less compared to recent data as energy prices pulled back near the end of the month. Consumer energy prices grew 6.6% in June following a 4.4% increase in May. Gasoline prices grew 10.1% after a 5.7% increase in May. Petroleum import prices grew 4% in July and Natural Gas import prices rose 5.8%.

Food prices should have a limited impact on July CPI but there is upside risk from the July Ag-Price Index which increased 1.9%, and the July Ag- Export Price Index, which rose 6.7%. Food prices, representing roughly 15% of CPI, grew 0.7% in June following a 0.3% rise in May and a 0.9% increase in April.

July Core CPI is expected to remain muted with shelter, medical care and vehicle prices all expected to post marginal increases over the period. There is the threat of pipeline inflation sneaking its way into core prices as firms must eventually compensate for higher energy prices.

The July CPI data are likely to reflect a near-term peak in consumer prices, as the recent sell-off in energies should help drag y-o-y inflation figures significantly lower going forward.

July Headline CPI is expected to increase 0.4% following a 1.1% June increase. Core CPI is expected to increase 0.2% after a 0.3% gain prior. Y-o-Y Headline CPI is expected to grow marginally to 5.1% and Core CPI is expected to be unchanged at 2.4%.

Energy prices are once again expected to be the main contributing factor to the expected increase, though this impact will be considerably less compared to recent data as energy prices pulled back near the end of the month. Consumer energy prices grew 6.6% in June following a 4.4% increase in May. Gasoline prices grew 10.1% after a 5.7% increase in May. Petroleum import prices grew 4% in July and Natural Gas import prices rose 5.8%.

Food prices should have a limited impact on July CPI but there is upside risk from the July Ag-Price Index which increased 1.9%, and the July Ag- Export Price Index, which rose 6.7%. Food prices, representing roughly 15% of CPI, grew 0.7% in June following a 0.3% rise in May and a 0.9% increase in April.

July Core CPI is expected to remain muted with shelter, medical care and vehicle prices all expected to post marginal increases over the period. There is the threat of pipeline inflation sneaking its way into core prices as firms must eventually compensate for higher energy prices.

The July CPI data are likely to reflect a near-term peak in consumer prices, as the recent sell-off in energies should help drag y-o-y inflation figures significantly lower going forward.

Annual CPI inflation: 4.4

m/o/m  0.0

Core Anuual CPI 1.9

Core m/o/m CPI -0.2

RPI: 5.0

m/o/m -0.1

RPIX  5.3

The Bureau of Labor Statistics has added to its list of corrections on this morning’s CPI data. Labor notes that:

• The 0.8% Food price increase in today’s CPI data is the largest since a 0.9% increase in April 2008

• The 1% increase in the price of Food at Home is the largest increase since a 1.5% increase in April 2008

• The 6.1% increase in Vegetable prices is the highest since a 7.7% increase in November 2004

• The 6.6% increase in Energy Prices is the largest since a 6.9% increase since November 2007

• The 10.4% increase in Fuel Oil prices is the largest since a 10.4% increase in May 2008

• Airline Fares rose 4.5% in June, the largest increase since a 5% increase in June 2001

The Labor Dept. has issued a correction to historical information from this morning’s June CPI report.

Officials say the 1.1% jump in headline CPI was the largest increase since September 2005, not June 1982, as previously specified.

Additionally, Labor clarified that the decline in Real Earnings (-0.9%) was the biggest since Sept-05, when they fell 1.1%

The June CPI rose 1.1%, higher than analysts had expected and the largest monthly increase since the Katrina-related price spike in September 2005. The core rate rose 0.3%, above the 0.2% increase that analysts had expected. On a year-over-year basis CPI is up 5%, its largest 12-month gain since 1991 and the core rate is up 2.4% from last June.

Energy prices rose 6.6% in June, the largest gain since 2005. Energy price increases reflected a 10% increase in both gasoline and fuel oil. Natural gas rose almost 5% during the month.

Food prices rose 0.8% in June and are up 5.3% during the past 12 months. Vegetable prices increased 6.1%, their largest price gain since 2001. Dairy prices rose 1.6% and beef prices rose 1.7%.

The core CPI rose 0.3%, its largest increase since January. Rents increased 0.4% and the Labor Department’s assessment of owner’s equivalent rent rose 0.3% during the month. Core commodities rose 0.1% reflecting small gains in apparel and vehicle prices. Core services rose 0.4% as medical care services rose 0.3%, airline fares rose 4.5% and tuition costs rose 0.5%. Core services are up 3.3% from June 2007 and core commodities are virtually unchanged from year earlier levels despite the falling dollar putting upward pressure on the prices of imported goods.

June Headline CPI is expected to increase 0.7% following a 0.6% increase in May, which would push the y-o-y figure to 4.5% from 4.2% in May. Core CPI in June is expected to match the May increase of 0.2%, which would leave the y-o-y reading unchanged at 2.3%.

Energy prices are once again expected to be the largest influence in the expected surge in June CPI. This relationship was clearly present in the higher-than-expected June PPI reading today — energy prices increased 6%, with gasoline prices up 9%.

Indeed, energy prices reached new record territory in June after May CPI reflected a 4.4% overall energy increase, along with a 5.7% rise in gasoline prices. Petroleum import prices increased 7.4% following an upwardly revised 8.9% increase in May and an upwardly revised 7.9% increase in April. Natural gas import prices, up 9.9% in June, rose for a 9th consecutive month.

Rising food prices also pose upside risk to June headline CPI as the ag-price index posted a 7% increase over the period. Food prices were up 0.3% in May CPI following a 0.9% increase in April. The June PPI report revealed a 1.5% increase in food prices following a 0.8% increase the previous month. Ag-export prices grew 2.2% in June following a 0.2% increase in May.

Core prices are expected to remain subdued, though there are upside risks from pipeline inflation pressures due to previous increases in the cost of food and energies.

The paper says CPI in the spring understated energy inflation due to statistical anomalies caused by seasonal adjustments. The article quotes a government economist saying these “quirks” will be unwound in the June CPI data, due at 8:30am EDT today. Article