Up Modestly at +0.2% for July 2024

• Topline CPI rose by 0.2% in July 2024 in seasonally-adjusted terms, slightly below PNC’s expectations 

• Core CPI, less Food & Energy, gained 0.2% in July 2024, its third straight 2.0% annualized-basis result

• Food price inflation moderated for both the At Home (+1.5% annualized) and Away from Home (+2.5% annualized) categories 

• Housing-related inflation snapped back from a 3-month deceleration, rising 0.4% in July 2024

Consumer Price Index (CPI) inflation came in slightly below PNC’s expectations for July 2024 for both the Topline and Core measures. Topline CPI inflation rose by 0.2% for the month, as did Core CPI. Aside from a jump in the Housing CPI index, the July 2024 CPI inflation report should be welcomed as a continuation of the downward trend toward the Fed’s inflation goal, and as support for interest rate cuts to move ahead beginning in September and continuing through the fourth quarter of the year. 

Core CPI, which excludes volatile food and energy inputs and aligns with the Federal Reserve’s preferred, policy-setting metric, rose by only 0.17% in July 2024 versus the month prior. This Core metric has now posted annualized monthly gains of 2.0% or less for three (3) consecutive months. Combining the slowdown in Core CPI inflation with a slowing pace of hiring in the U.S. economy, the Fed has all of the ammunition that it needs to begin lowering interest rates throughout the remainder of this year and into 2025. 

Energy prices presented less upward pressure on Topline CPI than anticipated, coming in at +0.03% for July 2024. Gasoline prices were up a similarly marginal amount for the month (+0.01%), allowing the year-over-year comparison to remain in negative territory at -2.2%. Concerns are again rising that conflict in the Middle East could broaden, which could in turn place upward pressure on oil prices. While that result would not impact the Core CPI result directly, it would be a catalyst that could generate volatility in the inflation trend later this year as the cost of shipping of goods to market would rise, and consumer prices would bear the brunt of that development. 

Housing CPI jumped to a +0.4% monthly gain in July 2024 after posting three (3) consecutive months of much slower inflation through the 2^nd quarter of the year. Housing accounts for more than 40% of the overall, Topline CPI index and includes necessities such as utility bills, and home maintenance needs (e.g., furniture). Recent declines in mortgage rates may well signal the potential for a reacceleration in Housing CPI entering 2025 as would-be homebuyers who have delayed purchases given the exceptional combination of stark price growth and high mortgage rates have been able to save more and could see falling mortgage rates push them over the goal line on affordability. A new round of homebuying would thereby put pressure on overall inflation from demand for big ticket goods. 

Fed officials’ rhetoric has shifted markedly toward alertness toward the labor market side of their dual mandate as inflation has resumed its downward trend through the middle months of the year. The July 2024 CPI report reinforces perspectives that their shift has been appropriate, and should remove all barriers – either spoken or in action – against the Fed taking its first steps in lowering interest rates beginning at September’s FOMC meeting and following on with cuts in both November and December as well.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.