After falling sharply in May, US CPI inflation stabilized in June. The annual rate of inflation stabilized at 1.7% Y/Y, the lowest level since early 2011, while the consensus was looking for a further decline to 1.6% Y/Y. On a monthly basis, CPI stayed unchanged in June, as lower prices for energy (-1.4% M/M), transportation (-0.7% M/M), utilities & fuels (-0.3% M/M) and commodities (-0.2% M/M) were offset by higher prices for food (0.2% M/M), apparel (0.5% M/M), medical care (0.6% M/M), recreation (0.3% M/M) and education & communication (0.1% M/M). As price declines were mainly based in energy, core CPI rose by 0.2% M/M in June, in line with expectations. The annual rate of core inflation dropped slightly, from 2.3% Y/Y to 2.2% Y/Y, but remains significantly above the headline rate of inflation.
After the sharp slowdown in inflationary pressures, the stabilization is no surprise as lower prices for energy due to the decline in the oil price was offset by higher prices for some core components.
In June, US industrial production rebounded by 0.4% M/M; slightly stronger than expected 0.3% M/M increase. The previous figure was however slightly downwardly revised, from -0.1% M/M to -0.2% M/M. The breakdown shows that the rebound was led by manufacturing (0.7% M/M) and mining (0.7% M/M), while utility production fell by 1.9% M/M. The details of the manufacturing sector show that strength was wide-spread as production of motor vehicles and parts (1.9% M/M), machinery (2.3% M/M) and computer and electronics (1.1% M/M) all rose in June. Capacity utilization picked up too, from a downwardly revised 78.7% to 78.9%. Over the second quarter as a whole, industrial production seems to have slowed significantly compared with the previous quarters.