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Economy in Brief

U.S. Consumer Price Index Under Control in April
by Tom Moeller May 14, 2008

The consumer price index (CPI-U) rose 0.2% last month, down from the 0.3% March increase and less than the 0.3% rise that was generally expected. Year-to-year, prices rose 3.9% which was off the earlier highs of 4.4%.

Less food & energy, consumer prices also were under control last month and posted just a 0.1% uptick. That was half the Consensus forecast for a 0.2% gain. The year-to-year rise of 2.3% was equal to last year's full year gain and down from the 2.5% increase during 2006.

Food & beverage prices provided lift to last month's gain in the CPI with a 0.9% increase. The year-to-year increase of 5.0% was the strongest since 1990. Prices for meats poultry & fish broke out of a several month slumber and rose 0.9% (3.7% y/y). Showing real strength, however, were prices for cereal & bakery products which increased another 1.4%. The y/y rise in these prices of 8.9% was the strongest since 1989. Dairy product prices also were quite firm and rose 0.7%. They surged 11.8% year-to-year.

Energy prices were under control last month and fell slightly. The weakness was due to a surprising 2.0% (+20.7% y/y) decline in seasonally adjusted gasoline prices. (Not seasonally adjusted gas prices rose 5.6% m/m in April and they are up another 6.1% so far in May.) Conversely, fuel oil prices last month surged 3.6% (42.8% y/y) while natural gas & electricity prices also were strong. They posted a 2.5% increase (6.7% y/y).

Core goods prices were unchanged following two consecutive months of 0.1% decline. Lower prices for new & used motor vehicles led the weakness with a 0.2% decline (-0.3% y/y). Prices for household furnishings & operations also fell by 0.1% (-0.1% y/y) after their brief 0.5% March increase. Apparel prices showed the only one month strength with a 0.5% (-0.6% y/y) increase that was the strongest rise since last November.

Core services prices also were under control and ticked up just 0.1%. Shelter prices, which constitute 33% of the total CPI, for the second month rose just 0.1% (2.6% y/y). Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, rose 0.2% (2.6% y/y) and rents rose 0.3% (3.6% y/y). The downside to shelter costs was provided by lodging away from home where prices fell 1.9% (+1.1% y/y). Medical care services prices increased 0.3% (4.7% y/y) and tuition costs surged 0.6% (5.6% y/y). Prices for public transportation fell 0.4% (7.3% y/y) after the 2.5% March rise.

Are Inflation Targets Good Inflation Forecasts? from the Federal Reserve Bank of Chicago is available here.

Has the Behavior of Inflation and Long-Term Inflation Expectations Changed? from the Federal Reserve Bank of Kansas City can be found here.

Consumer Price Index (%) April March February April Y/Y  2007 2006 2005
Total  0.2 0.3 0.0 3.9 2.9 3.2 3.4
Total less Food & Energy 0.1 0.2 0.0 2.3 2.3 2.5 2.2
  Goods less Food & Energy 0.0 -0.1 -0.1 0.1 -0.4 0.2 0.5
    Services less Energy 0.1 0.2 0.1 3.1 3.4 3.4 2.8
  Energy -0.0 1.9 -0.5 15.5 5.6 11.0 17.0
  Food & Beverages 0.9 0.2 0.4 5.0 4.0 2.3 2.5
        
Chained CPI: Total (NSA)  0.5 0.8 0.3 3.5 2.5 2.9 2.9
 Total less Food & Energy  0.1 0.5 0.3 1.9 2.0 2.2 1.9
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