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Economy in Brief

CPI Rising More Quickly
by Tom Moeller June 14, 2006

Consumer prices (CPI-U) rose 0.4% last month and matched Consensus expectations. The 0.3% rise in prices less food & energy, however, was firmer than expectations for a 0.2% gain.

While slight, the upside surprise in the measure of "core" price inflation does indicate a renewed up trend in the rate of price increase.

Core goods prices rose 0.1% for the second month, but those two gains followed a 0.3% increase in March. Whether this is normal volatility (core goods prices declined 0.1% in February) or an uptrend emerging will be more evident with the release of the June price data.

Apparel prices rose 0.2% (0.0% y/y) in May following m/m gains of 0.6% and 1.0%. Household appliance prices rose 0.2% (1.3% y/y) and furniture prices rose 0.2% (0.4% y/y), the second m/m increase after three consecutive months of decline. New & used motor vehicle prices were unchanged (0.1% y/y) and tobacco prices fell 0.1% +3.9% y/y), the second consecutive down month. Medical care commodity prices rose 0.4% (4.3% y/y) for the fourth month in the last five.

Core services prices rose 0.4% during May, an uptick after three consecutive months of 0.3% increase. The acceleration was due to a 1.0% (5.1% y/y) jump in public transportation costs. Shelter prices also increased a more rapid 0.4% (3.3% y/y) after a 0.3% rise during April, an increase that very much reflected a 0.6% (3.3% y/y) jump in the rental equivalence measure of owners' primary residences. In addition, a 3.3% y/y gain in rents is an acceleration from the low of 2.5% in early 2004. Finally, education costs rose 0.5% (6.0% y/y) for the third consecutive month and medical care services prices rose 0.3% (4.1% y/y).

A 4.9% m/m jump in gasoline prices (33.3% y/y) caused energy prices to surge another 2.4% though in June gas prices have leveled at an average $2.90 per gallon. Natural gas & electricity prices fell 0.6% (+12.7% y/y), the fifth decline in the last six months.

Food prices rose 0.2%. Meat, fish & poultry prices fell 0.5% (-0.1% y/y).

The chained CPI, which adjusts for shifts in the mix of consumer purchases halved the prior month's increase and rose 0.3%. Less food & energy the increase in prices also decelerated to just 0.1%.

Borrowing by U.S. Households from the Federal Reserve Bank of Richmond is available here.

Consumer Price Index May April Y/Y 2005 2004 2003
Total  0.4% 0.6% 4.1% 3.4% 2.7% 2.3%
 Total less Food & Energy 0.3% 0.3% 2.4% 2.2% 1.8% 1.5%
  Goods less Food & Energy 0.1% 0.1% 0.3% 0.5% -0.9% -2.0%
  Services less Energy 0.4% 0.3% 3.3% 2.8% 2.8% 2.9%
 Energy 2.4% 3.9% 23.3% 16.9% 10.8% 12.2%
 Food & Beverages 0.2% 0.0% 1.9% 2.4% 3.4% 2.1%
             
Chained CPI: Total (NSA) 0.3% 0.6% 3.4% 2.9% 2.5% 2.0%
 Total less Food & Energy 0.1% 0.3% 2.2% 1.9% 1.7% 1.1%
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