Forget what the media tells you, the latest round of inflation data was troubling.
The headline numbers for the Consumer Price Index (CPI) for the month of July pointed to a slowdown in inflation: month over month (MoM) CPI came in at 0.2% while year over year (YoY) at 2.7% on expectations of 0.2% and 2.8%, respectively.
However, “under the hood” the data was highly problematic.
For starters, Core-CPI (CPI excluding energy and food prices) came in hotter than expected at 3.1% YoY on expectations of 3.0%. Granted, this is a very small upside surprise, but the devils in the details and the details point towards inflation stabilizing at 3%, NOT heading towards the Fed’s target of 2%.
Case in point as Mike Konczal points out, the percentage of Core-CPI components that are clocking in at an annualized rate of 3% is RISING, not falling. The month of July saw 52% of the 83 items comprising Core-CPI growing at an annualized rate of over 3%!
Core-CPI is not the only problem area in the data.
Over two thirds (68%) of total CPI components (including food and energy prices) are now rising at a faster than 2% annualized rate. The initial disinflationary wave that occurring during the first half of 2025 has reversed and prices are now rising for MOST CPI components. This means inflation is BROADENING, which is a BIG problem.