US Yield Pressures Ease a Tad on CPI Figure

By Glenn Dyer | More Articles by Glenn Dyer

US consumer price inflation slowed a little in August as the prices of used cars slid, partially reversing the surge earlier in the year that helped boost the CPI to its highest level for more than a decade.

Headline consumer inflation rose 0.3% in August from July, or an annual 5.3% which was lower than the 0.4% and 5.4% rise estimate from the market. The CPI rose an annual 5.4% in July.

The less volatile core reading excluding food and energy costs showed a modest gain of 0.1% and below the 0.3% market consensus. August’s rise was the smallest since February when the surge started and was down from the 0.3% rise in August.

Investors were not impressed – Wall Street fell, even though the small fall was seen as a positive by strategists.

The Dow shed 292.06 points, or 0.8%, to 34,577.57. The S&P 500 lost nearly 0.6% to 4,443.05 and the Nasdaq fell 0.5% lower to end at 15,037.76. Comex gold jumped back over $US1,800 an ounce to $US1,806 and US 10-year bond yields fell back under 1.30% to end at 1.2910%.

The Aussie dollar firmed a little to trade just over 73.30 IS cents in Asia on Wednesday morning. That all left the overnight future market down 42 points ahead of the resumption of trade on the ASX this morning.

Helping keep a lid on the core CPI reading was a large 1.5% fall in prices for used cars and trucks, which ended five straight monthly increases.

Rapid rises in prices of used cars and trucks, as well as services in industries worst affected by the COVID-19 pandemic, were the key drivers behind a heating up of inflation at the start of the year.

Airline fares slumped 9.1% in August, as a resurgence in Covid Delta infections cut demand for air travel. There were also falls in the cost of motor vehicle rentals and insurance.

In the 12 months through August, the core CPI increased 4.0% after advancing 4.3% in the year to July.

The reading supports the belief from the Fed and other US policymakers that the inflationary surge will fade as pressures from the higher oil prices (from a year ago) and one offs like sharp rises in new and used car prices disappear.

But some economists point to rapidly rising gas prices ahead of the northern winter (a series of seven year highs in trading so far this month), continuing bottlenecks caused by Covid Delta in the US and across Asia which are impacting logistics and product deliveries, and rising labor costs in the US.

They point to recent increases in hourly wages by giant retailer, Walmart, while Amazon said on Tuesday it lifted its starting wage for new hires to more than $US18 an hour and hiring 125,000 new employees ahead of the holiday selling season.

That’s in addition to the 40,000 new executive and tech hires announced earlier this month.

That takes the number of people hired by Amazon in the 21 months of the pandemic to more than 450,000.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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