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Economy in Brief

CPI Rises 0.5% with Pick-Up in Energy
by Carol Stone January 18, 2007

The December consumer price index (CPI-U) rose 0.5% after November's flat reading. In fact, this was the first increase since August. The monthly change was in line with consensus expectations at a 0.5% rise. The 12-month inflation was 2.6%, less than 3.4% in 2005.

Prices less food & energy were up 0.2%; they had been unchanged in November. This too matched consensus expectations, at a 0.2% increase. The December-on-December rate was 2.6%, the same as the total.

Core goods prices were unchanged in December, following three consecutive declines; the year-on-year pace was +0.2%. The December mix included gains in apparel (0.6%), tobacco (1.5%) and personal care products (1.9%). Declines included new & used motor vehicles (-0.3%), medical care commodities (0.2%) and audio/video equipment (0.7%). Computer prices were unchanged.

Core services prices repeated their November 0.2% increase. In fact, carried to a second decimal place, December, at 0.20%, had the smallest increase since last January, 0.17%. Shelter slowed back to a 0.3% rise from 0.4% in November; public transportation continued to fall, but just 0.2% in December after 1.9% in November. Information technology and services were down 1.8%, but this was the smallest decline in recent months, following, for instance, 4.2% in November. Medical services were up just 0.2% and education increased 0.5%. Despite the huge rise in personal care products, personal care services inched up only 0.1%.

Energy prices rebounded sharply, up 4.6% on the month. This put them up 3.1% from December 2005. Gasoline prices surged 8.0% in December, heating oil rose 3.2% and piped gas and electricity were up 1.2%.

Food & beverage prices were unchanged in December. Fruits and vegetables prices dropped 1.5%, their second consecutive sizable decline. Cold weather in the South this month, though, may make such declines short-lived. Nonalcoholic beverages, alcoholic beverages and cooking fats and oils also declined. Dairy product prices steadied with a 0.1% rise after their November fall of 0.6%, and prices for meats, poultry, fish & eggs also rose 0.1%, a bit slower than November's 0.2%. Cereals were up 0.4%, the same as in November.

The chained CPI, which adjusts for shifts in the mix of consumer purchases, was up just 0.1% in December and the chained "core" fell 0.2%.

Consumer Price Index December November Y/Y 2006 2005 2004
Total  0.5% 0.0% 2.6% 3.2% 3.4% 2.7%
 Total less Food & Energy 0.2% 0.0% 2.6% 2.5% 2.2% 1.8%
  Goods less Food & Energy 0.0% -0.4% -0.1% 0.2% 0.5% -0.9%
  Services less Energy 0.2% 0.2% 3.7% 3.4% 2.8% 2.8%
 Energy 4.6% -0.2% 3.1% 11.1% 16.9% 10.8%
 Food & Beverages 0.0% -0.1% 2.2% 2.3% 2.4% 3.4%
             
Chained CPI: Total (NSA) 0.1% -0.2% 2.4% 2.9% 2.9% 2.5%
 Total less Food & Energy -0.2% -0.2% 2.3% 2.3% 1.9% 1.7%
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