When Is The September CPI Report, And What Should You Expect From It?

On September 13, at 8am EST, the U.S. Bureau of Labor Statistics will release the Consumer Price Index (CPI) report for the month of August. This will be among the more important data releases in September for financial markets.

Inflation is very closely watched currently. Not only has inflation prompted much higher interest rates, but Fed Chair Powell made clear in an August speech that the Fed is unlikely to ease up on rate hikes until they are very confident that U.S. inflation is well under control. Powell noted that even the positive report for CPI in July was insufficient to give the Fed confidence that inflation was truly heading back to the Fed’s 2% target.

Whatever the upcoming CPI report says, it remains likely that the Fed will raise interest rates by around 50 to 75bps at their next meeting, but the data may inform the Fed’s medium-term thinking as we look to Fed meetings later this year and in early 2023.

July’s Improvement

July’s data was broadly encouraging, falling energy prices lead to the lowest month-on-month inflation reading since the current U.S. inflation surge began. Inflation was flat month-on-month. That was good news.

However, there were still some concerns in the data. Obviously despite one good month, the year-on-year trend still has annual inflation at 8.5%, and the costs of housing and food continued to rise. Together food and housing, given their high weight in the CPI series, contribute almost half of the U.S. inflation number. So they will again be closely watched with the September’s CPI release covering the month of August.

Food

With food, the markets will want to see some deceleration in the month-on-month price increases which have risen around 1% each month for 2022. This is a particular problem because rises in food costs are felt disproportionately by lower income households.

Looking at recent months of CPI data its hard to say that food price inflation has slowed at all, so any slowdown in food price inflation in the upcoming report would be welcome, but is not guaranteed. The dramatic rise in food costs is perhaps the biggest concern the Fed can point to at the moment as it looks at recent inflation data. Food carries a material weight in the CPI index and its price is rising fast in 2022.

Housing

For shelter, there’s something of a disconnect between what the CPI series reports and what other housing and rental series suggest. Housing has been rising in price more slowly than food, but the CPI has shelter costs rising at a slower pace than industry benchmarks from the likes of Zillow and RedfinRDFN
. So the question is if the shelter index in the CPI will rise to catch up with other housing costs and rental index benchmarks, or if it may start to soften as concerns in the housing market grow. In recent months, shelter costs have been rising more slowly in CPI data, but still faster than the Fed would like. This really matters as shelter costs are the largest single category weight in the CPI index.

August Data

CPI data for the month of August may show another subdued month-on-month inflation number, similar to July. That’s because gasoline prices have fallen sharply for the month of August based on EIA data.

However, once again, swings in energy prices, even if generally moving in the right direction may not be enough for the Fed. Moves in food and housing will be closely monitored for signs that underlying inflation is easing.

So on September 13, we may see another reassuring inflation headline. However, the Fed and financial markets will be looking beyond it to assess trends in sub-components like food and housing costs. If those series are still rising sharply then the Fed may be hesitant to dial back on interest rate hikes however good the headline month-on-month CPI number appears.