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Economy in Brief

CPI Fell Again, Unexpectedly; 2005 Strongest Since 2000
by Tom Moeller January 18, 2006

The consumer price index (CPI-U) fell 0.1% last month on the heels of the 0.6% drop during November. Consensus expectations had been for a 0.2% rise. Despite the latest declines, the 2005 average rise in prices of 3.4% was the strongest since 2000 while the December to December rise of 3.4% equaled the 2004 increase.

Energy prices posted a surprising 2.2% decline last month due to widespread m/m declines in fuel oil (+24.0% y/y) and natural gas (+30.1% y/y) prices. Gasoline prices also fell for the third straight month (+16.1% y/y) to an average $2.19 but have wince risen to an average $2.30 in January.

Food prices likewise were under control and rose just 0.2%, the slimmest increase since August.

Prices less food & energy again rose 0.2%, the third consecutive such increase and matched Consensus expectations. The year to year gain in core prices core prices accelerated during the last two years from the low of 1.5% during 2003 as core goods prices inflated rather than fell. In December, goods prices less food & energy were unchanged and the 2005 increase of 0.5% was the strongest since 2000.

A 0.3% decline in apparel prices (-1.1% y/y) was accompanied by lower prices for new & used vehicles (+0.4% y/y). These declines were offset by higher furniture & bedding prices (0.6% y/y) and higher appliance prices (3.0% y/y). Medical care commodity prices rose 0.2% (3.7% y/y) while educational books & supplies also rose 0.4% (5.1% y/y).

Core services prices increased 0.3% but the full year gain of 2.8% just equaled 2004. The increase in medical care prices faded late in the year (4.4% y/y) and but school tuition & fees posted a strong 6.2% December to December spike. The increase in shelter prices was steady at (2.5% y/y).

The chained CPI which adjusts for shifts in the mix of consumer purchases fell for the second consecutive month though the full year gain of 2.8% was the strongest since the series inception. Less food & energy prices also fell m/m but the annual increase of 1.8% was the strongest since 2002.

Productivity and Economic Outlook, today's speech by Fed Governor Susan Schmidt Bies can be found here.

Consumer Price Index Dec Nov Y/Y 2005 2004 2003
Total  -0.1% -0.6% 3.4% 3.4% 2.7% 2.3%
 Total less Food & Energy 0.2% 0.2% 2.2% 2.2% 1.8% 1.5%
  Goods less Food & Energy 0.0% -0.1% 0.1% 0.5% -0.9% -2.0%
  Services less Energy 0.3% 0.4% 3.0% 2.8% 2.8% 2.9%
 Energy -2.2% -8.0% 17.0% 16.9% 10.9% 12.2%
 Food 0.2% 0.3% 2.4% 2.5% 3.4% 2.1%
             
Chained CPI: Total (NSA) -0.3% -0.5% 2.8% 2.8% 2.3% 2.0%
 Total less Food & Energy -0.2% 0.0% 1.7% 1.8% 1.5% 1.1%
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