First CPI Rise in 4 months and Small Bounce in Retail Sales

US July CPI rose 0.3%, a tad more than expected and the first rise in four months. Of note rents increased for the second consecutive month. Core prices rose 0.1%, leaving the year-over-year rate steady at 0.9%. Retail sales rose 0.4%, a little less than expected in July, but the June figure was revised from -0.5% to -0.3%. However, more importantly, retail sales excluding autos, gasoline, and building materials, which is what the Commerce Dept uses to calculate GDP actually fell in July after a 0.3% rise in June. Retail sales account for about 40% of consumption. Seasonally speaking, July is often a transitional month for retailers as they shift from summer merchandise to back-to-school.

Overall, the data does not shed much fresh light on the US economy. Inflation remains below desired levels and the US consumer, while not in complete hibernation, remains largely sidelined. The dollar may continue to consolidate ahead of the weekend and in North America this would imply a somewhat weaker tone.