The Consumer Price Index for All Urban Consumers (CPI-U) was virtually unchanged in July, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The July level of 208.299 (1982-84=100) was 2.4 percent higher than in July 2006.
There are some important caveats to this statement. Ignore them if you don't consume energy or food.
Food prices increased .3% and are up at a compound annual 3-month rate of 4.3% and increased 4.1% in the last 12 months.
Energy prices decreased 1% and are up at a compound annual 3-month rate of 16% and increased 1% in the last 12 months.
The core rate (again this assumes you don't buy food or energy) 2.2% in the last 12 months.
Here's more from the report:
During the first seven months of 2007, the CPI-U rose at a 4.5 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.5 percent for all of 2006. The index for energy, which rose 2.9 percent in 2006, advanced at a 21.3 percent SAAR in the first seven months of 2007 despite registering declines in each of the last two months. Petroleum-based energy costs increased at a 36.9 percent annual rate and charges for energy services rose at a 3.8 percent annual rate. The food index has increased at a 5.7 percent SAAR thus far this year, following a 2.1 percent rise for all of 2006. Excluding food and energy, the CPI-U advanced at a 2.3 percent SAAR in the first seven months, following a 2.6 percent rise for all of 2006.
Here's how Bloomberg reported the numbers:
Consumer prices in the U.S. rose 0.1 percent in July, the smallest gain in eight months, signaling the Federal Reserve may view inflation as less of a threat.
The increase in the cost of living followed a 0.2 percent advance in June, the Labor Department said today in Washington. Core prices, which exclude food and energy, climbed 0.2 percent and were up 2.2 percent from a year earlier.
``Price pressures are declining because of a slowing economy and higher interest rates, and I think those pressures will continue to ease,'' Lindsey Piegza, an analyst at FTN Financial in New York, said before the report. ``Inflation is still at the top of the Fed's range, so the Fed continues to downplay the declines because it wants to make sure.''
And CBS.Marketwatch:
With gasoline prices falling, U.S. consumer prices increased 0.1% in July, the slowest inflation rate in eight months, the Labor Department reported Wednesday.
The core consumer price index, which excludes volatile food and energy prices, increased 0.2% for the second straight month.
The seasonally adjusted inflation figures were exactly as expected by economists surveyed by MarketWatch.
Falling energy prices, a moderate rise in housing costs and flat auto prices held the CPI down in July, partially offsetting higher prices for apparel and medical care.
The CPI is up 2.4% in the past year, while the core CPI is up 2.2%, close to the upper end of Federal Reserve's target zone.
Expect this news to encourage talk about a rate cut. However, here's why I don't think that will happen.
2 comments:
Following up my accidentally "anonymous" comment yesterday, let's compare the 3, 6, and 9 month inflation increases in the PPI and CPI (note, these are not annualized rates):
3 month .8 (CPI) 1.3 (PPI)
6 month 2.8(CPI) 4.3 (PPI)
9 month 3.1(CPI) 6.0 (PPI)
12 month increases are being held down by the collpase in oil prices after the Goldman Sachs commodity index "rebalancing." Unless another big downdraft arrives this fall, inflation at the producer level is becoming a serious drag, and we should expect one or more of the following: decreased corporate profits, more costcutting (layoffs), and/or consumer price increases (unlikely except at the higher end).
This is going to hit at the first time in over 15 years that the consumer has not had one of the following 3 assists: increasing house prices, increasing share prices, decreasing interest rates.
Draw your own conclusions.
From McClatchy:
The Bureau of Labor Statistics said in its July inflation report that egg prices are 33.7 percent higher than they were in July 2006. Over the same period, according to the department's consumer price index, whole milk was up 21.1 percent; fresh chicken 8.4 percent; navel oranges 13.6 percent; apples 8.7 percent. Dried beans were up 11.5 percent, and white bread just missed double-digit growth, rising by 8.8 percent.
When I read that food prices are up only 4.1% in the last year and compare it to this inflation info on food staples, it leads me to conclude that the overall numbers are somewhat meaningless.
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