Explore our services

Wealth Planning
Receive a multigenerational wealth plan with personalized strategies and guidance.
Investing
Experience a holistic approach to investing, centered on your goals and priorities.
Lending
Unlock liquidity with a variety of customized lending products, strategies and solutions.
Banking
Access a variety of banking products and services tailored to your needs.
Family wealth platform
Explore our platform of specialized services designed for ultra-high-net-worth clients.

August 2024 CPI Report: Inflation cooled, edging closer to the Fed's target

September 12, 2024

The August 2024 CPI report moderated to 2.5% year-over-year, cementing the likelihood that the Fed will begin cutting rates next week.

Key takeaways

The August 2024 Consumer Price Index (CPI) rose 0.2% month-over-month (MoM) and 2.5% year-over-year (YoY), the smallest annual increase since February 2021.
There was an unexpected rise in core inflation in August that was driven by a strong increase in shelter and transport services prices, which we do not think will be sustained.
Regardless, the big picture is that this data represents something of a "draw" – it doesn't suggest a reacceleration of inflation, but it doesn't meaningfully progress the core disinflation narrative either.
In our strategists’ view, this report is a mixed bag for the Federal Reserve (Fed), but they do not believe it will sway the Fed from cutting rates next week. While this report highlights there are still pockets of strength in portions of CPI, overall, our strategists view the report as further progress on the way to the Fed’s 2% inflation target.

Contributors

Cristina Dwyer

Analyst, J.P. Morgan Wealth Management

The August 2024 Consumer Price Index (CPI) rose by 0.2% month-over-month (MoM) and cooled to 2.5% year-over-year (YoY) from 2.9% YoY in July.¹ This marks the smallest annual increase since February 2021 and suggests that inflation is well on the way to the Federal Reserve’s 2% target.

Core CPI (excluding food and energy) rose slightly more than expected in August, driven by a strong increase in shelter and transport services prices.² Regardless, the big picture is that this data represents something of a "draw" – it doesn't suggest a reacceleration of inflation, but it doesn't meaningfully progress the core disinflation narrative either.

Headline CPI findings

The fall in August’s headline CPI was primarily driven by declines in fuel and goods prices. This offset price gains elsewhere, in particular in the services prices such as rent, airfares and car insurance.³

The energy index fell 0.8% MoM in August, following no change in July, and fell 4% YoY. The monthly decline was attributed to a 0.6% drop in gasoline prices, 0.7% drop in electricity prices and 1.9% drop in natural gas prices. ⁴ Any weakness in energy prices later this year will help further reduce inflation.

The food index increased 0.1% MoM, following a 0.2% rise in the prior two months, and 2.1% YoY. The food away from home index increased 0.3% MoM, while the food at home index was unchanged.⁵

Our strategists expect slowing inflation, along with wages that remain supportive, to continue to enhance consumer purchasing power. This will likely bolster consumer spending in the near-term.

This chart shows the contributions of various subcomponents of the CPI index to the overall CPI index from February 2020 to August 2024.

Core CPI findings

Core CPI (excluding food and energy) rose by an unexpectedly stronger 0.3% MoM and by 3.2% YoY, unchanged from July.⁶ The monthly rise was fueled by a strong increase in shelter and transport services prices, which we do not think will be sustained. Despite the stronger monthly rise, average inflation over the past three months moved closer to 2% annualized, easing some concerns over August’s hotter than expected print.

Core services prices were up 0.4% MoM in August, boosted by the sticky shelter component. Shelter inflation, which accounts for a third of the total inflation basket, increased by 0.5% MoM – the largest rise since the beginning of the year – and 5.2% YoY. Within the shelter component, owners’ equivalent rent (OER) reaccelerated by 0.5% MoM in August and the rent index rose by 0.4% MoM.⁷

The resurgence in OER indicates that shelter inflation has ticked up in the past two months. The rise in OER was broad-based across the U.S., in contrast to the unexpected rise in rental prices a few months ago that was mostly concentrated in New York City. As home price growth is slowing and rents on new leases are rising at a slower pace, our strategists expect shelter inflation to further moderate over the next year.

Within core services, transportation services prices also surprised to the upside, up 0.9% MoM, the highest level in four months. This was driven by a 3.9% rise in airfares, following five consecutive monthly declines. That said, this component is volatile month to month and we don’t view the rise in August as sustainable due to the recent fall in global oil prices.⁸

There were also price increases in motor vehicle insurance and maintenance prices, which have risen significantly this year – but going forward, we expect them to soften.⁹

Core goods prices fell 0.2% MoM in August, following a decline last month. This fall was driven by a 1% decline in used cars and trucks prices, following a 2.3% decline in July, and household furnishings and operations. Apparel prices increased, but not by enough to offset these declines.¹⁰

Going forward, our strategists expect core inflation to moderate this year as the economy slows and the labor market becomes more balanced.

Possible implications for the Fed

In our strategists’ view, this report is a mixed bag for the Fed, but they do not believe it will sway the Fed from cutting rates next week. While this report highlights there are still pockets of strength in portions of CPI, overall, our strategists view the report as further progress on the way to the Fed’s 2% inflation target.

Fed Chairman Jerome Powell made it clear in his Jackson Hole speech that the progress made on inflation up to this point is sufficient to justify the start of rate cuts – this report doesn’t change that.¹¹ In conjunction with last week’s labor market data, the odds of a 25-basis point cut versus a 50-basis point cut were viewed as a toss-up, but today’s inflation data tips the scales in favor of 25 basis points.¹²

Our strategists think prospects for a gradual – rather than aggressive – rate cutting cycle should be embraced by investors. That would reflect broader economic health and a normalization of activity as the vestiges of pandemic-era distortions fizzle away.

For more information on how this economic data may impact your investment strategy, consult your J.P. Morgan advisor.

References

U.S. Bureau of Labor Statistics (BLS), “Consumer Price Index Summary.” (September 11, 2024)

Ibid.

10.

Ibid.

11.

Board of Governors of the Federal Reserve System, “Review and Outlook.” (August 23, 2024)

12.

Bureau of Labor Statistics (BLS), “The Employment Situation – August 2024.”

Connect with a Wealth Advisor

Our Wealth Advisors begin by getting to know you personally. To get started, tell us about your needs and we’ll reach out to you.

Connect now

IMPORTANT INFORMATION

This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.

GENERAL RISKS & CONSIDERATIONS. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan representative.

NON-RELIANCE. Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Legal Entity and Regulatory Information.

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.

J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document. JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.

Check the background of our firm and investment professionals on FINRA's BrokerCheck

To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products.

This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation.

This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC ("JPMS"). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Please read additional Important Information in conjunction with these pages.

Key takeaways

Contributors

Headline CPI findings

Core CPI findings

Possible implications for the Fed

References

Connect with a Wealth Advisor

SOLUTIONS

CAREERS

HELPFUL LINKS

JPMORGANCHASE SITES

CONNECT WITH US

Key takeaways

Contributors

Headline CPI findings

U.S. CPI by components

Year on Year percentage change. of U.S. CPI by components

Core CPI findings

Possible implications for the Fed

References

Connect with a Wealth Advisor

SHOW MORE

Related insights