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Economy in Brief

More Readings of 2Q Price Inflation
by Tom Moeller July 31, 2006

An acceleration in the "core" PCE chain price index within the 2Q GDP report rankled markets on Friday. At 2.9%, the q/q increase was a marked acceleration from the 2.0% average of the prior four quarters

Indeed, the price index for durable personal consumption indicated deflation at a slower rate and the y/y gain in service prices accelerated to 3.6% from a low of 3.1% late last year. That acceleration reflected a 5.0% surge during 4Q05.

The price index for clothing & shoes was, however, the main bugger as it posted a 3.5% gain (AR) last quarter after several years of price deflation.

Several price indexes showed slower rates of growth including most business investment categories, residential investment and federal government.

Also moving moderately to the upside were the gains in the price indexes for state & local government as well as exports. Continuing strong were the gains in the nonresidential investment chain price index for structures, up 10.7% (AR) last quarter and 13.3% y/y after an 11.3% surge last year.

Chain Price Indexes 2Q '06 1Q '06 Y/Y 2005 2004 2003
GDP 3.3% 3.3% 3.3% 3.0% 2.8% 2.1%
  Personal Consumption 4.1% 2.0% 3.3% 2.9% 2.6% 2.0%
       Less Food & Energy 2.9% 2.1% 2.3% 2.1% 2.0% 1.4%
     Durables -0.8% -1.0% -1.5% -0.7% -1.6% -3.6%
     Nondurables 3.3% 3.3% 3.3% 3.0% 2.8% 2.1%
       Clothing & Shoes 3.5% -1.0% -0.4% -1.0% -0.4% -2.5%
     Services 3.1% 3.1% 3.6% 3.2% 3.2% 3.2%
  Investment: Equipment & Software 0.0% 0.6% -0.5% -0.4% -0.4% -1.1%
  Investment: Residential 2.0% 3.8% 4.8% 5.1% 7.3% 4.8%
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