Analysts at Nomura explained that CPI rose 0.4% (0.402) m-o-m in August, in line with expectations (Nomura: 0.348%, Consensus: 0.4%), bringing the y-o-y rate to 1.9% (1.94%).
"Among non-core components, food-away-from-home prices showed a decent increase. However, this metric tends to be more volatile in the summer, possibly due to changes in the school year. Energy prices increased strongly in August (2.8% m-o-m), driven by a sharp uptick in gasoline prices.
Excluding food and energy, core CPI inflation rose 0.2% (0.248%), slightly stronger than expectations (Nomura: 0.189%, Consensus: 0.2%), driven by a sharp rebound in lodging-away-from-home prices as well as upside surprises from rent. Lodging prices, as we had expected, rebounded strongly (4.4% m-o-m), reversing a large decline in the previous month. Rent and owners’ equivalent rent (OER) inflation surprised on the upside, which is inconsistent with the fundamentals of rental housing markets.
However, some of the increase in OER inflation appeared to be associated with data collection disruptions due to Hurricane Harvey. Core goods prices remained weak. The strongerthan expected core CPI increased the likelihood, in our view, of a December rate hike marginally but potential distortions from Hurricane Harvey and resulting noises to inflation data in coming months might mask the underlying trend of inflation."
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