A softer June CPI report is fueling a strong rally in Treasuries this morning, with short and intermediate yields down 11 basis points in the immediate reaction.
Core CPI rose 0.1% (0.065% unrounded) m/m in June versus expectations of a 0.2% gain, and the year-over-year rate fell 30 basis points to 3.3% (3.4% expected). The 3-month annualized core rate fell to 2.1%, the slowest since March 2021 and down from 3.3% the prior month. The biggest contributor to the downside surprise was a 5% m/m decline in airfares, which is typically a more volatile category on a month-to-month basis. A reduction in shelter costs also contributed to the June decline in core CPI.
All-in-all, this was a positive report, but the contribution from airfares is a bit of a red flag (i.e., not typically a sustainable/consistent category). Fed funds futures are now nearly fully priced for a September rate cut, but it’s premature to determine whether this report was enough to sway the hawks of the FOMC. Regardless, this is a continuation of a recent trend of gradual labor market cooling, slowing consumption, and slowing inflation.
Jason Haley
Chief Investment Officer
| Date | Event | Survey | Actual | Prior | Revised | |
| 7/11/2024 | CPI MoM | 0.10% | -0.10% | 0.00% | — | |
| 7/11/2024 | CPI Ex Food and Energy MoM | 0.20% | 0.10% | 0.20% | — | |
| 7/11/2024 | CPI YoY | 3.10% | 3.00% | 3.30% | — | |
| 7/11/2024 | CPI Ex Food and Energy YoY | 3.40% | 3.30% | 3.40% | — | |
| 7/11/2024 | CPI Index NSA | 314.614 | 314.175 | 314.069 | — | |
| 7/11/2024 | CPI Core Index SA | 318.78 | 318.346 | 318.14 | — | |
| 7/11/2024 | Real Avg Hourly Earning YoY | — | 0.80% | 0.80% | 0.70% | |
| 7/11/2024 | Real Avg Weekly Earnings YoY | — | 0.60% | 0.50% | — | |
| 7/11/2024 | Initial Jobless Claims | 235k | 222k | 238k | 239k | |
| 7/11/2024 | Continuing Claims | 1860k | 1852k | 1858k | 1856k | |
| 7/11/2024 | Monthly Budget Statement | -$76.1b | — | -$347.1b | — | |
| 7/12/2024 | PPI Final Demand MoM | 0.10% | — | -0.20% | — | |
| 7/12/2024 | PPI Ex Food and Energy MoM | 0.20% | — | 0.00% | — | |
| 7/12/2024 | PPI Ex Food, Energy, Trade MoM | 0.20% | — | 0.00% | — | |
| 7/12/2024 | PPI Final Demand YoY | 2.30% | — | 2.20% | — | |
| 7/12/2024 | PPI Ex Food and Energy YoY | 2.50% | — | 2.30% | — | |
| 7/12/2024 | PPI Ex Food, Energy, Trade YoY | — | — | 3.20% | — | |
| 7/12/2024 | U. of Mich. Sentiment | 68.5 | — | 68.2 | — | |
| 7/12/2024 | U. of Mich. Current Conditions | 66.1 | — | 65.9 | — | |
| 7/12/2024 | U. of Mich. Expectations | 69.6 | — | 69.6 | — | |
| 7/12/2024 | U. of Mich. 1 Yr Inflation | 2.90% | — | 3.00% | — | |
| 7/12/2024 | U. of Mich. 5-10 Yr Inflation | 3.00% | — | 3.00% | — |
