Inflation data comes in lower than expected

Yahoo Finance’s Brian Cheung joins the Yahoo Finance Live panel with the latest CPI report.

Video Transcript

ZACK GUZMAN: But first, I want to dig into that CPI report. As I said, weaker than economists were expecting in roughly what was a 0.4% rise expected there. 0.3% for the month of August. Compared to July, that was below the 0.5% reading we saw there. Also, year over year, 5.3%.

When we dig into the report, though, interesting readings when you strip out food and energy as well, 4% year over year in August. That was versus the 4.3% we saw in July. Expectations for price growth there was 4.2%. So, all in all, the reading really pointing to weaker than expected inflation growth. And for more on that, I want to bring on Yahoo Finance's Brian Cheung to put it all into context for us. Brian.

BRIAN CHEUNG: Well, Zack, as you mentioned, those big headline numbers coming in a bit softer than the Street had expected. 0.3% the actual figure on a month over month basis for the month of August. That's coming from the Bureau of Labor Statistics. As you mentioned, on a year over year basis, 5.3%. Now, when you strip out some of those more volatile components of the consumer price index like food and also energy, you do get a month over month change of 0.1%. On a year over year basis, that came in at 4%.

Now, if you were to take a look at a certain number of categories throughout the CPI, you can see the numbers ahead of you on your screen. Gasoline going up by 2.8%. That's obviously going to be one possible price pressure that economists will be looking at in months to come.

But interestingly, shelter costs coming in at 0.2%. This is a slower pace than we had seen in the June to July period, where there was some concern that higher rents, higher home prices-- we've heard anecdotes of this-- might provide more persistent inflationary pressures. At least for the August report, seems like maybe some of those pressures have abated. We'll see what it looks like as we get to the reports later in the year.

But very interestingly, we haven't seen a negative number on used cars and trucks for the first month in a while. We actually saw used car, truck, and prices fall this month at least by 1.5%. And also some of those reopening travel trade kind of price categories also falling. Hotels and motels down by more than 3%, airline fares down by more than 9%.

Now, this is all very interesting within the context of what the Federal Reserve might do as it heads into its next policy meeting. That will be next Tuesday and Wednesday, where the big question is going to be, are they still on track to start paring back some of the accommodation that they've been providing?

On one hand, if you take a look at the CPI coming in softer than expected, this might give the Federal Reserve a bit of a green light for having more wiggle room to maybe wait as late as its November or December policy setting meetings to announce a tapering of its $120 billion a month pace of asset purchases. It seems like September was already off the table with a weaker than expected August jobs report. So we'll see what the Fed says next week. It'll also come with new projections for inflation. And maybe the CPI report does support team transitory in that meeting, Zack.

ZACK GUZMAN: Yeah, interesting to see trucks and cars there down for the month-- used, I should say. But yeah, a certain break from what we've seen in the past. And props to you for being able to say hotels, motels and not follow it up with Holiday Inn. Very impressive there.

BRIAN CHEUNG: I was very tempted. I was so tempted.

ZACK GUZMAN: Brian Cheung bringing us the latest there on the CPI front. Appreciate that.

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