Inflations slows again
US inflation was expected to come in at +0.3 per cent for June, and +3.1 per cent over the year.
The numbers were better than expected, with inflation for the month coming in at +0.2 per cent, and +3 per cent for the year.
In fact, as our own James Foster pointed out, inflation over the year was only +2.97 per cent.
Over 70 per cent of the increase was accounted for by the shelter component, which is enormously lagging, and much of the remainder was motor insurance.
I think this is something Australia will also see over the coming months - a dramatic rise in insurance costs contributing to inflation.
Except for used cars, goods price inflation in the US has effectively ceased to exist over the past few months.
There was all the usual "yeah, but..." commentary, but nevertheless it's been very heartening to see inflation drop from 9 per cent to under 3 per cent so quickly, even if the tailwind from the base effect has now concluded.
Down Under
Bond yields dropped sharply on the news, including in Australia - with a dovish speech from Reserve Bank Governor Lowe also helping to push yields lower over the past 24 hours, the Governor noting that further work from monetary policy may or may not be needed, depending on upcoming data flows.
ANZ reported today that spending in the Aussie economy has dropped -11.4 per cent year-on-year according to the data over the first part of July, which is further evidence of what we all know is coming...a big slowdown in consumer spending.
Source: ANZ
So, that's it: US inflation fell to under 3 per cent, and is the lowest in 27 months.
