July CPI was flat headline and up .1% ex food and fuel, both exactly in line with forecasts. But, because of rounding, the y/o/y drop in CPI was 2.1%, .2% more than expected and the biggest drop since ’49 while core CPI rose 1.5% y/o/y. Owners equivalent rent, 24% of the overall CPI, was flat, the first time it hasn’t risen since June ’03. While there has been a trend towards renting instead of buying, a combination of unsold homes turning into rentals and many moving back home or sharing apartments, have kept a lid on landlord pricing power. Energy prices fell .4% but since the end of the survey period, have risen right back. Food prices fell by .3%. Vehicle prices (6.9% of CPI) rose .3% after rises in the prior 3 months as the sharp drop off in production has given auto dealers pricing power and the clunker plan will add to that as many cars get destroyed. Apparel prices rose a strong .6% after a .7% gain in June. Medical care rose .2%.

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