Less Drag From Pandemic Reopening Items As Airfares Offset Hotel Drop

While the Covid pandemic continues to fade into the rear view mirror, volatility in multiple pandemic reopening categories of the CPI basket continue to have an outsized impact on month-to-month dynamics. August was mixed in this regard, but overall these line items dragged on CPI a little less (-0.03pp) than they did in July (-0.08pp), with a few categories bucking recent deflationary trends.

• As noted earlier, the standout among the pandemic reopening categories was Airfares which helped push supercore services prices higher with a rise of 4.9% M/M in August - the 2nd biggest increase since May 2022 and a little more than expected - after 4 consecutive monthly contractions. With that increase, airfares are 6% below pre-pandemic levels and 23% below the pandemic peak. (By comparison, the CPI basket as a whole is +18% vs Feb 2020).
• Lodging prices dropped the most since April (and much more than analysts had expected at -3.0% M/M) for the 4th drop in 5 months. They remain 9% higher vs pre-pandemic levels but 6% below peak.
• Used cars and trucks deflated for the 3rd consecutive month at -1.2% M/M, in line with expectations; prices are now 40% higher vs pre-pandemic levels in Feb 2020, but 10% below peak.
• New car prices ticked higher by 0.2% M/M (expectations on this category were mixed) after 4 consecutive declines and have essentially flatlined for the past 10 months. They're 1% below peak - but 20% above pre-pandemic prices.
• Car/Truck rental prices meanwhile picked up for the first time since January at +1.3% M/M. That leaves them 20% below peak levels but 25% up from pre-pandemic.

% M/M SASource: BLS, MNI