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Economy in Brief

CPI Again Fell 0.5%, Core Increase Lightest Since February
by Tom Moeller November 16, 2006

The consumer price index (CPI-U) fell 0.5% during October for the second consecutive month and the decline outpaced expectations for a 0.3% drop. Together, the declines were the largest on record.

Energy prices about repeated the prior month's weakness and fell 7.0% as gasoline prices dropped 11.1% (-18.3% y/y) and fuel oil prices fell 6.1% (-7.7% y/y) for the second month. Gasoline prices have since fallen another 1.3% m/m so far in November to an average $2.22 per gallon. Natural gas prices were down as well by 7.7% (-24.0% y/y) & electricity prices slipped 0.2% (+10.4% y/y).

The 0.1% rise in prices less food & energy was the weakest since a like gain this past February and fell short of Consensus expectations for a 0.2% increase.

Core goods prices fell 0.3%, down for the third month in the last four. New & used motor vehicle prices fell 0.3% (-0.4% y/y) for the second consecutive month and apparel prices reversed all of their prior month's strength with a 0.7% (+0.6% y/y) decline. Household furnishings & operation prices were unchanged (1,.1% y/y) as were medical care commodity prices (3.3% y/y). Tobacco prices rose 0.1% (2.3 y/y).

Core services prices rose 0.3% for the second month as did shelter prices (4.0% y/y). The rental equivalence measure of owners' primary residences rose 0.4% (4.2% y/y) and rents rose 0.4% (3.9% y/y) for the fifth consecutive month. Public transportation costs fell 1.0% (+1.9% y/y) after a 0.7% September decline but education costs surged 0.6% (6.2% y/y). Medical care services prices rose 0.4% (4.2% y/y) for the third consecutive month.

Food & beverage prices rose 0.3% led by a 0.7% jump in dairy prices (-0.3% y/y). Prices for meats, poultry, fish & eggs rose 0.2% (1.9% y/y).

The chained CPI, which adjusts for shifts in the mix of consumer purchases, fell 0.3% for the second month but less food & energy prices rose 0.3% for the second month.

The Minutes to the Latest Meeting of the Federal Open Market Committee can be found here.

Consumer Price Index October September Y/Y 2005 2004 2003
Total  -0.5% -0.5% 1.3% 3.4% 2.7% 2.3%
 Total less Food & Energy 0.1% 0.2% 2.8% 2.2% 1.8% 1.5%
  Goods less Food & Energy -0.3% 0.1% 0.2% 0.5% -0.9% -2.0%
  Services less Energy 0.3% 0.3% 3.8% 2.8% 2.8% 2.9%
 Energy -7.0% -7.2% -11.2% 16.9% 10.8% 12.2%
 Food & Beverages 0.3% 0.4% 2.6% 2.4% 3.4% 2.1%
             
Chained CPI: Total (NSA) -0.3% -0.3% 1.6% 2.9% 2.5% 2.0%
 Total less Food & Energy 0.3% 0.3% 2.5% 1.9% 1.7% 1.1%
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