The U.S. June CPI report was only a little better than expected as energy held down the overall gain, and recent trends for higher medical and clothing costs remain in place.
June CPI printed flat, but core was up 0.2% in the fourth such monthly gain. This resulted in rates of +1.7% overall and +2.2% core over the year.

Food posted +0.2% as fruit and meat prices rose, but cereals and dairy fell. All six major grocery groupings have risen in the last 12 months.

Energy posted -1.4% as gasoline fell 2.0%; the unadjusted change in gas was -6.1% so seasonal adjustment cut the drop. Fuel oil fell, and electric printed -0.5% on severe adjustment.

Core prices included medical care at +0.6%, its largest gain since September 2010 as hospital costs and physicians' bills jumped, and a second large monthly gain that suggests rising costs are being passed through. The gain in doctors' services was the largest since +1.0% in January 2010.

In other core components, trends were somewhat mixed. Apparel printed +0.5% in a fourth gain as costs from Asia rise, and new vehicles +0.2% in a fifth gain (unadjusted car prices were flat so the advance was all in the seasonal). Used car prices were flat. Recreation posted +0.3% as film, newspapers, and sports vehicles including bicycles jumped. Tobacco printed +0.4%, possibly reflecting the new tax in Illinois.

Owners' Equivalent Rent posted a modest +0.1%.

Overall, CPI was a little better than expected. Rising gasoline prices at the pump will probably add to CPI ahead, and the trends for higher core necessities continue. Apparently the bottom line is that even falling energy prices cannot cause a drop in consumer inflation at this juncture.

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