U.S. headline CPI rose more than expected month-over-month, and year-over-year growth accelerated to 1.9%. Headline CPI growth in August was driven by higher shelter costs and higher gasoline prices.
Core CPI was up 0.2% in August, which was the highest month-over-month increase since February. Shelter costs again contributed to the month-over-month growth. Core CPI year-over-year growth held steady at 1.7% for the fourth consecutive month.
Core CPI year-over-year growth decelerated from 2.3% in January to 1.7% in May but year-over-year growth has shown signs of stabilization since then. One-time factors have played a factor in some of the growth deceleration over that period, notably wireless services pricing which shaved 0.1 to 0.2 percentage points (ppt) off of year-over-year growth.
The coming months might be more volatile due to Hurricanes Harvey and Irma which impacted U.S. energy markets and pricing, but also likely shelter and other goods and services. However, we believe that inflation in the U.S. is more prevalent than currently perceived and, over time, we expect inflation to pick up further. Our expectations for accelerating inflation come from not only the passage of the aforementioned transient factors rolling off of the annual calculation, but also more importantly from higher wages due to labor market tightness.