CPI Up a Gentle 0.2%, Down from May's 0.7% Jump

by: SA Eli Hoffmann

U.S. consumer prices rose 0.2% in June, taking a decided break from the 0.7% jump they took in May. Core CPI, which excludes prices of food and energy, also rose 0.2% after climbing 0.1% in May. Economists were looking for a 0.1% CPI and 0.2% core CPI increase. The numbers, released Wednesday morning by the Labor Department, bring annual CPI to 2.7% and core CPI to 2.2%. The moderate gains will likely reinforce the Fed's long-term economic forecast for a mix of slowing inflation and gentle growth. Fed Chairman Ben Bernanke delivers his semi-annual testimony before Congress Wednesday morning. He will likely say once again that inflation remains the predominant risk to the U.S. economy, with core inflation still hovering around the Fed's unofficial 1-2% comfort zone. Breaking the CPI down, energy prices fell 0.5% after gaining 5.4% in May; food was up 0.5%; medical care +0.2%; housing +0.3%; and lodging +2.5%. Clothing fell 0.6%. Separately, the Labor Department said average weekly earnings jumped 0.5% in June, bringing the yearly running total to 3.9%. Average hourly earnings were up 0.3%.

Sources: CPI press release, Real Earnings press release, Wall Street Journal
Commentary: Market Climbing a 'Wall of Worry'Wholesale Prices Drop Unexpectedly on Lower Energy CostsTrying to Put the Sector Horse Race into Context
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)

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