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Economy in Brief

U.S. Consumer Price Index Jumped 1.1%, Y/Y Gain The Most Since 1991
by Tom Moeller July 16, 2008

The June consumer price index (CPI-U), as reported by the Bureau of Labor Statistics, jumped 1.1% after May's 0.6% rise. The increase, fueled by higher energy prices, was the strongest since October 2005 and it lifted the y/y increase to 4.9%, its strongest since 1991. Consensus expectations had been for a 0.7% increase for last month.

Energy prices jumped 6.6% in June after the 4.4% surge during May. Gasoline prices spiked a seasonally adjusted 10.1% and were up 32.8% y/y. (Not seasonally adjusted gasoline prices rose 7.9% m/m last month and they are up another 1.5% so far in July.) Fuel oil prices also were quite strong and surged 8.5% (61.2% y/y). Natural gas & electricity prices rose 1.5% (10.1% y/y).

Food & beverage prices were strong again and jumped 0.7%. That lifted the y/y gain of 5.2% to its fastest since 1990. The three-month rate of increase jumped to an even firmer 8.1%. Prices for cereals & bakery products rose at a 15.2% rate during the last three months while dairy and related products increased at an 11.1% rate. Prices for meats poultry & fish showed upward pressure lately and rose at a 7.8% rate while dairy product prices surged at an 11.1% rate.

Less food & energy consumer prices again matched expectations and rose 0.2%, the same as during May. During the last three months core prices rose at a 2.5% annual rate, the quickest since January.

Core goods prices offset May's slip and nudged up 0.1%. On a the three-month basis prices nudged lower at a 0.1% rate. Prices for new & used motor vehicles rose 0.1% in June but are down at a 0.7% annual rate during the last three months. Apparel prices also ticked up 0.1% and, together with a firm 0.5% gain in April, was enough to lift the three month increase to 1.0%, its firmest since January. Prices for household furnishings & operations were unchanged. They posted a 0.5% uptick during the last three months versus a 0.1% decline during all of last year.

Core services prices posted 0.4% increase, which was the largest rise since January, and it lifted the three month growth rate to 3.6%. The strength again was led by a 3.4% (13.4% y/y) surge in public transportation prices and they are up at a 23.6% rate during the last three months. Medical care services prices rose a reduced 0.3% (4.6% y/y) and shelter prices increased 0.3% (2.6% y/y). Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, rose 0.3% (2.6% y/y) and rents rose 0.4% (3.7% y/y). Education costs rose another 0.5% and here prices rose at an accelerated 5.1% rate during the last three months following a 2.4% rise during 2007.

The chained CPI, which adjusts for shifts in consumption patterns, rose a faster 0.8%. Less food and beverages chained prices rose 0.1%.

PCE and CPI Inflation Differentials: Converting Inflation Forecasts from the Federal Reserve Bank of Kansas City can be fund here.

Has the Behavior of Inflation and Long-term Inflation Expectations Changed? also from the Federal Reserve Bank of Kansas City is available here.

Consumer Price Index (%) June May June Y/Y  2007 2006 2005
Total  1.1 0.6 4.9 2.9 3.2 3.4
Total less Food & Energy 0.3 0.2 2.4 2.3 2.5 2.2
  Goods less Food & Energy 0.1 -0.1 0.2 -0.4 0.2 0.5
    Services less Energy 0.4 0.3 3.3 3.4 3.4 2.8
  Energy 6.6 4.4 24.4 5.6 11.0 17.0
  Food & Beverages 0.8 0.3 5.3 4.0 2.3 2.5
Chained CPI: Total (NSA)  0.8 0.6 4.2 2.5 2.9 2.9
 Total less Food & Energy  0.1 0.0 2.1 2.0 2.2 1.9
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