On a month-to-month basis, the Consumer Price Index (CPI) and Core CPI accelerated in July. Inflation in core services, which accounts for 65% of total CPI, bounced back from the outlier and re-accelerated sharply; food prices ticked up; energy prices stopped dropping; and durable goods prices slowed their historic plunge, according to the Bureau of Labor Statistics today.

It’s the historic plunge in durable goods prices that has done the heavy lifting in bringing inflation down this year. But durable goods prices aren’t going to plunge forever from the pandemic spike. Services inflation, though it has come down from the red-hot zone, remains high.

On a month-to-month basis:

• Core Services CPI: +0.31% (+3.8% annualized), acceleration from +0.13% in June.
• Durable goods CPI: -0.30% (-3.6% annualized), a slower drop than in June.
• Core CPI: +0.17% (+2.0% annualized), biggest rise since April.
• Food at home CPI: +0.13%, same increase as in June.
• Energy: unchanged, after the drops in prior months.
• Overall CPI: +0.15% (+1.9% annualized), highest since April.

On a year-over-year basis, in summary:

Core services CPI (red line in the chart below) rose by 4.9% year-over-year in July. It has been near the 5% line since December 2023. It includes all services except energy services.

Durable goods CPI (green) has been falling since mid-2022 to unwind the massive spike during the pandemic, led by plunging used-vehicle prices. In July, durable goods CPI fell by 4.1% year-over-year, same drop as in June, and the biggest drops since 2003.

Core CPI (blue), which excludes food and energy, rose by 3.2% year-over-year, continuing a slow deceleration, driven by the historic plunge in durable goods prices, while services inflation remains high.

Overall CPI (yellow) rose by 2.9% year-over-year, a slow deceleration from June. It has been in the same narrow range since June 2023.

“Core” CPI, month-to-month.

Core CPI rose by 0.17% in July from June, or +2.0% annualized, the biggest increase since April, and acceleration from June (+0.06%), which had been an outlier in the month-to-month squiggles (blue line in the chart below).

The increase in month-to-month Core CPI was driven by the re-acceleration in core services CPI. The durable goods CPI plunged, but at a somewhat slower rate than in prior months, pushing down core CPI somewhat less forcefully.

The six-month core CPI, which irons out some of the month-to-month squiggles, rose by 2.8% annualized, the third deceleration in a row.

“Core services” CPI bounced back from the outliers in June & May.

Core services CPI increased by 3.8% annualized in July from June (+0.31% not annualized), a big bounce-back from the outlier in June and the highest since April (blue line).

The six-month core services CPI decelerated to 4.2% annualized, the smallest increase since January 2022, as the high outlier in January (+8.3%) fell out of the six-month period (red)…..

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