CPI Goes Higher on Food, Energy, Transportation, Medical, Tuition & Books, Restaurants, Alcohol, Rent, etc.
If you are purchaser of computers, women's clothing, or household furnishings, well then I have some good news for you: Everything is on sale, and prices are falling!
However, if you regularly buy Fuel, use transportation, need hospital services, education, books, eat food at home, pay tuition, require medical care, eat out, drink booze, or pay rent, well, sorry: Everything is costing you more.
Even if you back out food & energy -- inflation ex-inflation -- we still have rising prices, and elevated inflation expectations.
This leaves the Fed painted into a corner -- the weak dollar, caused in large part by low rates, is adding to inflation. But the recession and the credit crunch are preventing the Fed from appreciably raising rates.
Here's your cost increase picture, measured year over year:
>
May CPI
click for bigger graphs
Sector Breakdown
Thanks, Jake!
Friday, June 13, 2008 | 10:05 AM | Permalink
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Comments
one wonders about that computer number. the whole geometric substitution thing is a load of crap. yeah, i'm getting twice the power, but if a 'middle of the road' computer costs two hundred more this year than last, how is that not inflation?
but hey, you have to have some sunshine amidst all the rain.
dont forget consumer sentiment!
Posted by: jhunt | Jun 13, 2008 10:15:34 AM
The yawning gap between headline and core-blimey inflation just keeps on widening -- 4.2% y-o-y headline; an other-worldly 2.3% on core ("beyond the Fed's comfort zone," LOL!).
Such loony-tunes data require new words to express. What is the noun derived from the adjective "ludicrous"? "Ludicrousness"? "Ludicrity"? "Ludicrosity"? Yeah, that sounds good.
These statistics are a ludicrosity.
Posted by: Jim Haygood | Jun 13, 2008 10:18:14 AM
This seems wholly apropos today:
http://mama.indstate.edu/users/nizrael/midis/bigtop.mid
Ciao
MS
Posted by: michael schumacher | Jun 13, 2008 10:20:47 AM
No problem. All I have to do is stop eating, drinking, paying rent, and traveling.
I mean, all this stuff is so much bother anyways!
Anyone know how to put oneself into suspended animation?
Posted by: Drew | Jun 13, 2008 10:34:52 AM
Last year Bernanke said: "Absolutely No Inflation".
After that lie, he went to cut rate crazily of 3.25%.
He deserved to be burned in Hell.
Posted by: Sean | Jun 13, 2008 10:40:26 AM
There’s something clearly wrong here, some of these numbers should be much lower. Especially with that low apparel number something is amiss, surely chewing on leather is a substitute for food. Why wasn’t the cost of food adjusted down to the price of leather belts, handbags and shoes?
Posted by: FormerlyknownasJS | Jun 13, 2008 11:10:09 AM
The CPI was positioned as less inflationary than it is. That suggests to me that "rate increase" threats are "jawboning".
Posted by: Commodities to the moon, Alice! | Jun 13, 2008 11:39:48 AM
But, retail sales are up!
And hey, oil is down today -- the Saudis have promised to make more!
Uh huh....
Posted by: donna | Jun 13, 2008 11:58:42 AM
Does CPI factor in reduced fees at Emperors Club following negative publicity brought by Elliot Spitzer? Just wondering...
Posted by: Risk Averse Alert | Jun 13, 2008 12:08:47 PM
"All I have to do is stop eating"
You could eat a computer. Its called the "substitution effect".
Posted by: me | Jun 13, 2008 12:32:11 PM
Yes, but there is no wage inflation, so the Fed can keep rates low. The high prices are necessary to move to increased efficiency that produces more for unit of oil consumed. When oil demand collapses due to efficiency increases, prices will deflate. The Fed should not discourage the reinvestment in energy efficiency by raising rates.
Posted by: bakho | Jun 13, 2008 12:33:38 PM
Hey Barry, enjoy the site very much. I'm just a layman when it comes to economics, but can someone explain this to me: today's NY Times reports "In May, gasoline prices rose 5.2 percent, and were up 21 percent compared with a year ago, according to the report."
What do they mean, 5.2%? A month ago I paid $3.83 a gallon at a station in the Bay Area, now it's $4.49. Doing some basic math, doesn't that mean gas has risen 17% in a month? Am I missing something here?
Posted by: kp | Jun 13, 2008 1:20:16 PM
kp -- I'm not vouching for the accuracy of CPI numbers, but they are surely using a monthly average. That is, an average of gasoline prices from May 1st to May 31st, with May 16th being the midpoint.
So the $3.83 you paid a month ago was in the middle of May, and was part of the number reported today (with a lag). The reported percentage changes are from April (April 1st to 30th, midpoint April 15th).
The $4.49 you see now will be part of the June CPI, to be reported in mid-July. And yes, that 17% hike you cite had better be there, or we're gonna blow the whistle on those data deceivers.
Posted by: Jim Haygood | Jun 13, 2008 1:47:35 PM
So you are saying that I have to start wearing womens clothes if I want to keep drinking booze?
Posted by: noXpert | Jun 13, 2008 1:57:29 PM
You want inflation--I'll give you a slice of inflation in my life--steel fabrication. Hot rolled steel bar:
(quote-via Steel Benchmarker)
U.S.—$1,166 per metric ton ($1,058 per net ton), FOB the mill—up $8 per ton from $1,158 ($1,051net) two weeks ago, up $606 per ton from the recent low of $560 ($508 net) on Aug. 13, 2007, and up $536 per ton from the recent high of $630 ($571 net) on April 9, 2007.
(end quote)
Thats right-- 560/metric ton on 8/13/07, now 1166/metric ton.
Try running a business with that.
Posted by: Neal | Jun 13, 2008 2:52:24 PM
Paulson stated a few days ago that the worse is over. I've learned over the last 8 years to believe the opposite of what the talking heads have said. There is zero credibility in the US financial area.
Posted by: winslow | Jun 13, 2008 3:05:25 PM
Inflation Expectations are highest in 26 years (1981) and Consumer sentiment is lowest since 1979 (5 pts above the lowest reading ever).
Meanwhile the economy is muddling along at 1%+ growth, unemp is 5.5% and inflation is between 2.3-4.1% according to the Fed.
How do these things reconcile? Barry, do a piece on this. I agree with your use of U6 in the misery index. Use inflation expectations for inflation, maybe.
Posted by: ReturnFreeRisk | Jun 13, 2008 3:12:07 PM
What a bunch of f#cking clowns running the show. Ben Bernake is in some soup kitchen line in 1933.
I actually think it would be better the rioting starts now so we can all but be assured that the current crop of leadership from government down the corporate is completely removed.
Posted by: shrek | Jun 13, 2008 3:18:54 PM
All the headlines I'm reading are saying this was a great CPI. The market went up. Go figure.
Posted by: John | Jun 13, 2008 4:35:52 PM
Time to head down to Chicos!!!
Posted by: John | Jun 13, 2008 5:42:19 PM
The tax rebates are percolating, but organic real wage-based income is not. In
real terms, average weekly earnings fell 0.4% in May for the second month in a
row, and down 1.2% on a year-over-year basis. Keep that in the back of your
mind once the tax stimulus runs its course later this summer. It remains to be
seen if the government can keep writing checks at the $120 billion pace it is
currently, but it will be interesting to see how the retailing landscape is going to
look beyond the third quarter once the tax relief fully subsides. If credit
conditions, employment and asset prices fail to revive, or if we do not see a major
retracement in gasoline or food prices, then we would expect to start seeing some
negative prints on the sales numbers by the time Labor Day rolls around, and
some very benign inflation prints soon thereafter.
Posted by: David Rosenberg | Jun 13, 2008 5:54:27 PM
but, Bob Brinker told me that inflation was dead and that high oil was a tax on the economy that would drive prices down.
Posted by: tree | Jun 13, 2008 6:48:03 PM
It's time to break out your old copy of Hackett-Fisher's The Great Wave. It has great historical coverage of the waves of inflation that have beset western society since the Middle Ages. During inflationary crises, the costs of necessities, fuel, food, rent, always rise, while the costs of manufactured goods fall.
You can draw your own parallels, but H-F points out that these inflationary bouts often signal the end of an economic regime, as in the 14th century and 16th century. Exactly where we are now with our society's continuous reinvention is harder to say, though we obviously have to be reinventing harder.
Posted by: Kaleberg | Jun 13, 2008 11:25:15 PM
