Highlights
In July, consumer price inflation eased on lower gasoline prices while the core slowed on a rare dip in shelter costs. CPI detail indicates that those who could afford vacations were the big winners in July. The headline CPI was flat in July after surging 0.7 percent the month before. The July pace was below the market forecast for a 0.1 percent rise. Helping to soften the July number was a decline in energy costs which dropped 0.4 percent after a 7.4 percent hike the month before. Meanwhile food price inflation fell 0.3 percent. Core CPI inflation slowed to a 0.1 percent uptick in July after rising 0.2 percent in June. The consensus projection was for a 0.2 percent increase in for the core.

Detail for the energy component show a 0.8 percent decline for gasoline after a 17.3 percent spike in June.

However, the big news was in the shelter subcomponent of housing. Shelter decreased 0.2 percent, following a 0.1 percent rise in June. Both rent and owners' equivalent rent were unchanged in the latest month. Lodging away from home, which includes hotels, fell 2.1 percent after increasing 0.3 percent in June. Discounts for traveler lodging pulled the latest number down.

Surprisingly, new & used motor vehicles rose 0.3 percent despite government credits in the cash for clunkers program. However, used vehicle prices were flat, reflecting lots of supply, while new vehicles were up 0.5 percent in July. States keep raising tobacco taxes to boost revenues and that was reflected in a 2.2 percent jump in tobacco & smoking products for the month.

Year-on-year, headline inflation eased further to minus 1.9 (seasonally adjusted) from down 1.2 percent in June from down 1.0 percent in May. The core rate slipped to up 1.6 percent in July from up 1.7 percent the month before. On an unadjusted year-ago basis, the headline number was down 2.1 percent in July while the core was up 1.5 percent.

Soft inflation is giving the Fed room to keep its balance sheet expansion high. But the weak CPI is indicative of a sluggish economy. Markets were little changed on the news.

Market Consensus before announcement
The consumer price index surged 0.7 percent, following a 0.1 percent uptick in May. In the latest month, energy costs posted a 7.4 percent hike while food price inflation was unchanged. Meanwhile, core CPI inflation firmed to 0.2 percent in June from a 0.1 percent uptick in May. The 7.4 percent boost in energy costs was largely due to a 17.3 percent spike in gasoline prices after a 3.1 percent gain in May. Looking ahead, energy prices are likely to dip temporarily in July and help ease the headline number. Also, the core should be very soft as the "cash for clunkers" program cut motor vehicle prices net for consumers toward the end of the month.

2009 Release Schedule

Released On: 1/16 2/20 3/18 4/15 5/15 6/17 7/15 8/14 9/16 10/15 11/18 12/16 Release For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov