Historic Inflation Data Hits Lowest Level Since February 2021 — But One Segment Remains Stubbornly High

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The U.S. annual inflation rate in August fell to its lowest point since February 2021, signaling a further easing of pressure on the cost of goods and services for U.S. consumers.

The Consumer Price Index (CPI) saw a cooler-than-anticipated annual headline print in August, cementing convictions for interest rate cuts by the Federal Reserve.

August CPI Inflation Report: Key Highlights

  • Headline CPI inflation fell from 2.9% in July to 2.5% in August 2024 on a year-over-year basis, falling short of the consensus forecast of 2.6% tracked by TradingEconomics.
  • On a monthly basis, inflation increased by 0.2% in August, matching both the previous month's reading and expectations.
  • The energy index declined by 0.8% in the month, following a stagnation in the previous month.
  • The shelter index soared by 0.5% in August, contributing the most to the overall increase in the all-items index.
  • Core inflation, which excludes volatile energy and food items, held steady at 3.2% year-over-year in August, matching forecasts.
  • On a monthly basis, core inflation rose by 0.3%, accelerating from the previous 0.2% and surpassing estimates of 0.2%.
  • In August, several items saw increases, including shelter, airline fares, motor vehicle insurance, education and apparel.
  • The items for used cars and trucks, household furnishings and operations, medical care, communication and recreation were among those that recorded a decline over the month.
Market Reactions

Investors focused on the unexpected rise in core monthly inflation than the drop in the annual headline figure, sending Treasury yields and the U.S. dollar higher after the report.

The U.S. dollar, as tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE: UUP), climbed 0.3% minutes after the release, while yields on the 10-year Treasury note surged by 8 basis points.

Rate-sensitive assets like gold and the Japanese yen fell, and futures on major U.S. equity indices saw minor declines.

The SPDR S&P 500 ETF Trust (NYSE: SPY) was down 0.3% in Wednesday's premarket trading. Tech stocks, as tracked by the Invesco QQQ Trust, Series 1 (NASDAQ: QQQ) traded 0.1% lower.