CICC: US inflation has entered a “shift period”
The Zhitong Finance App learned that CICC released a research report saying that the US CPI rose 0.1% month-on-month and 3.4% year-on-year after the quarterly adjustment in July, and core inflation was 0.2% month-on-month and 2.5% year-on-year, all in line with market expectations. Energy prices have continued to fall, but international oil prices have risen again since August, increasing uncertainty about future energy prices. In terms of core inflation, commodities are strong and services are weak. In particular, the prices of information technology products such as computers and software continue to rise, reflecting that the mismatch between supply and demand caused by the expansion of AI capital expenditure is gradually being transmitted to the consumer side. CICC believes that US inflation may have entered a new stage. The driving force is gradually shifting from supply shocks such as tariffs and oil prices to expanding demand brought about by AI investment, and the duration of inflation may be extended accordingly.
CICC's main views are as follows:
Total CPI inflation rose 0.1% month-on-month, and energy prices continued last month's downward trend. Energy prices fell 1.5% month-on-month after the seasonal adjustment in July. Among them, gasoline and fuel prices fell 2.9% and 1.7%, respectively, providing a buffer for easing inflationary pressure. Despite the impact of the situation in the Strait of Hormuz, international oil prices rebounded overall in July, but on average, they were still lower than in June, so there was no increase in inflationary pressure on a month-on-month basis. However, after entering August, international oil prices fluctuated and increased. If this trend continues or oil prices remain unchanged, gasoline and fuel prices will rise sequentially. Food prices were generally moderate in July, rising 0.1% month-on-month and 3.0% year-on-year. Among them, household food prices fell slightly by 0.1% month-on-month and dine-out prices rose 0.3% month-on-month.
Core inflation rose 0.2% month-on-month, which structurally showed strong commodities and weak services. Core commodity prices rose 0.2% month-on-month, the highest value since this year. Among them, the price of new cars rose 0.1% month-on-month, and used cars and trucks rose 0.4%, reflecting the recovery of demand for car purchases and car use, which had previously been suppressed, as fuel prices fell. Under the AI boom, IT commodity prices rose 1.4% month-on-month. Among them, the prices of computers, peripherals, and smart home assistants rose 3.5% month-on-month, the highest increase since 2021; prices of computer software and accessories rose 0.5% month-on-month to 21.2% year-on-year, the highest increase in history. This shows that strong AI capital expenditure has led to a mismatch between supply and demand, and is still driving up consumer goods prices.
In contrast, rent prices rose 0.1% month-on-month, the same as last month. Among them, hotel accommodation prices fell 3.3% month-on-month during lodging, which was the main drag. Non-rent core service inflation rose 0.2% month-on-month, and was generally moderate. Prices of medical services (0.6%) and education and communication services (0.5%) rebounded slightly month-on-month, and airline ticket prices rose 2.2%, but weakening segments such as motor vehicle insurance (-0.3%) limited the rise in service inflation.
Overall, CICC believes that US inflation may have entered a new stage, and its driving force is gradually shifting from the supply side to the demand side.
In the past year, US inflation was mainly affected by two types of supply shocks: the first is the rise in import costs due to tariffs, and the other is the rise in oil prices, which is driving up energy and transportation costs. Among them, the tariff impact was mainly concentrated in 2025. As the base effect gradually subsides, its marginal impact on inflation is weakening. The impact on oil prices began in March of this year. Although it has recently eased, geopolitical risks have not been completely eliminated. Since August, international oil prices have rebounded again, which means that energy prices may still disrupt inflation.
Meanwhile, a new source of inflation is gradually emerging — a demand shock caused by AI capital expenditure. Since 2025, US technology companies have continued to expand AI investment, and demand for hardware such as chips, storage, high-end servers, and network equipment has grown rapidly, causing the prices of these products to rise sharply and gradually spread to the prices of consumer electronics and computer software products. Unlike exogenous supply shocks such as tariffs and oil prices, this kind of inflation essentially stems from the expansion of investment demand. As long as AI capital expenditure remains high and the conflict between supply and demand is not mitigated, its price pressure may continue.
As far as the Federal Reserve is concerned, this inflation data has eased the pressure to raise interest rates in the short term to a certain extent, and some officials (such as Waller) who were previously open to interest rate hikes may choose to continue to wait and see. However, the Federal Reserve under Walsh's leadership has weakened its forward-looking guidance, which means that if strong employment or inflation data appears in the future, it may quickly re-trigger market expectations of interest rate hikes. Looking at the longer term, if the main source of future inflation shifts from supply shocks to demand expansion, then the duration of inflation may also be extended accordingly. Compared to supply-driven inflation, demand-driven inflation also requires more attention from policymakers.