Inflation Rate Tame?

Thursday, May 19, 2005 | 11:35 AM

Yesterday's CPI data (for April) was a stiff 0.5%, or 3.5% ona year over year basis. Yet the markets chose to focus on the flat core growth rate of 0.0%, or 2.2% on a year over year basis.

I suspect that CPI was an excuse for the rally, and not the underlying cause. The data is simply  belied by the ordinary consumers' daily experiences. Prices have been going up steadily, especially in areas not measured by the Department of Labor.

This chart shows both CPI and its smoothed out "Core" rate as in a recent uptrend. 

click for larger graphic

Briefing_cpi observes:

•     Y-o-y growth returns to Nov's four year high of 3.5%.
•     But the core (ex-food and energy) fell to 2.2% yoy fom Feb's 2 1/2 year high of 2.4%.
•     Flat core growth tremendously encouraging after the bloated gains of the prior two months -- 3 month average of trend 0.2%.
•     Energy prices (4.5%, 17% yoy) provided the lift along with an 0.7% jump in food prices.
•     Hotel/lodging -1.2% after 5% two month gain.  Medical care just 0.2% in April as vehicles were flat and apparel prices fell -0.6%.
•     Service costs at 3.2% yoy.  Core commodity costs at 0.5% yoy as energy costs are up 17%.


Here's the WSJ's take:

Wsj_05182005085202"Higher prices at the pump continued to force consumer prices higher last month, the government reported Wednesday, but there were signs that inflation pressures were moderating elsewhere in the economy.

The Labor Department said the consumer-price index for April rose 0.5%, driven largely by a 4.5% jump in energy prices -- the biggest gain in that category since a 5.7% jump in March 2003. Food prices also increased smartly, jumping 0.7% after a 0.2% gain in March. But excluding those often-volatile categories, consumer prices were unchanged last month.

In annual terms, the inflation picture was mixed. Overall consumer prices rose 3.5%, higher than the 3.1% gain in March, but core consumer prices rose 2.2%, slower than March's 2.3% gain. Thus far in 2005, CPI has increased at a seasonally adjusted annual rate of 4.8%; consumer prices climbed 3.3% in 2004.

Energy prices have been a culprit in pushing inflation gauges higher for many months. In April's CPI report, gasoline prices climbed 6.4% and natural-gas prices increased 5.6%. But crude-oil futures have sunk from highs of around $57 a barrel early last month to trade around $48 a barrel in recent days. That slide is likely to hold down petroleum prices in the future, economists said.


Energy Costs Fan Inflation;  Other Price Pressures Ease
April Consumer Prices Rose 0.5%, But 'Core' Index Was Unchanged
May 18, 2005 12:31 p.m.,,SB111641799105836833,00.html

Thursday, May 19, 2005 | 11:35 AM | Permalink | Comments (5) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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It would be extremely interesting to have a tool in which you could put all of your personal monthy budget or expenditures... and get some output on whether or not inflation is truely effecting you.

Fortunately (and unfortunately), over half my income goes to pay for debt (read: mortgage, 2 autos (no cc debt)). Without the CC debt I had looming at a younger age, my montly cost for these items is fairly fixed. It also seems that the increased property tax I pay on my house is made up for in decreased tax on my cars.

I currently drive/walk 1.2 miles to work. Gas prices have no [direct] effect on me. Hotel prices have no [direct] effect on me.

All of my lines to these big increases lately, including gas, hotels, etc, lead me to only indirect links. Obviously the grocery store will compensate for the raised rates from the food distributors... and my boss might feel minor pressure from higher hotel bills when I travel... but in the end, the only thing I see that's had any effect [directly] on me is the price of Milk. But then, if I head to Costco or Sam's it's unchanged from what I was paying a year ago.

Looking back... the largest increase in any of my expenses was the cable/net/phone bill... but it's still cheaper than 3 years ago (competition dropped prices dramatically at that time)

I'm thinking that my personal inflation rate is closer to 0% over the past year. Possibly 1% over the past 2.

Anyone want to build this software?

Posted by: Chad K | May 19, 2005 12:13:53 PM

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