August CPI rose .4% headline, (.1% more than the estimates) but fell y/o/y fell 1.5% (.2% higher than expected). The 9.1% m/o/m gain in gasoline prices was the main contributor. Food prices rose .1%. Ex food and fuel, prices rose .1% m/o/m, in line with estimates and is up 1.4% y/o/y. Owners Equivalent rent, 24% of the overall figure, rose .1% and has been subdued for months now as landlords compete with homes for rent and growing unemployment. Helping also to keep a lid on the core was a .4% drop in vehicle prices for new cars which was suppressed by the clunker rebate. But, used car prices rose 1.9% due to the reduced supply from old cars being brought to the junk yard. Bottom line, statistically, disinflation remains but we are getting closer to cycling thru the sharp drops in commodity prices and the headline figure should go positive soon with the degree being the question.

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