The Daily Update: US & UK CPI

Yesterday’s CPI out of the US came in lower than expectations with an increase of 0.3% in August, the consensus had been for a rise of 0.4%. This resulted in a slight decline in the year-over-year-growth rate to 5.3% from July’s 13-year high of 5.4%. The core metric, ex food and energy, advanced 0.1%, well below estimates of 0.3% whilst year-on-year it came in at 4%, again 0.2% below estimates.

The softer numbers were driven by declines in used car prices, falling 1.5%, as well as airfares falling over 9%. Hardly unsurprising after their meteoric rise in recent months. Prices for vehicle rentals also declined for a second-straight month, down 8.5%.

The slow down does vindicate somewhat Federal Reserve Chair Jerome Powell's long-held belief that high inflation is transitory, however we are not out of the woods yet by any stretch of the imagination, and markets will now look towards the next FOMC meeting on when and how fast any Fed tapering will take place.

We also had the CPI numbers out of the UK this morning. UK inflation jumped to 3.2% in August, (2.9% was eyed) from 2% in July and month-on-month the figure came in at 0.7%, again well above the 0.5% consensus. This was not just the highest level of inflation since 2012, it’s also the biggest month-on-month change in the level in the history of this inflation measure (started in 1997)

After the release the Office for National Statistics (ONS) noted that the surge was ‘likely to be a temporary change, adding that the UK government's' Eat Out to Help Out’ program last year may have been the key culprit to the numbers. However sharp rises in energy, transport and restaurant prices helped add fuel to the fire.

Have a lovely day.