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Economy in Brief

U.S. CPI Up 0.8% in July, Y/Y by 5.6%. Boost from Gasoline Prices Now Easing
by Tom Moeller August 14, 2008

The consumer price index (CPI-U) for July rose 0.8%. That was down somewhat from the June increase of 1.1%, according to the Bureau of Labor Statistics, but the gain was double the Consensus expectation for a 0.4% rise. The Y/Y increase of 5.6% was the fastest since late 1990.

For June and July together, prices rose at an 11.8% annual rate. Except for a short-lived spike in mid-2005 that was the fastest rate of increase since 1982.

Energy prices jumped another 4.0% in July after increases of 6.6% and 4.4% during the prior two months. Fuel oil prices continued strong and posted a 1.3% (61.1% y/y) increase while natural gas & electricity prices jumped 4.0% (15.0% y/y).

Gasoline prices jumped a seasonally adjusted 4.1% in July and they were up 37.9% y/y. Not seasonally adjusted gasoline prices, however, rose just 0.7% m/m last month and they are down 5.2% m/m on average so far in August.

Food & beverage prices continued strong. A 0.9% July increase lifted the y/y gain to 5.8% and that was the fastest since 1990. Prices for cereals & bakery products rose at a 17.0% rate during the last three months while dairy and related products increased at a 13.2% rate. Prices for meats poultry & fish showed increased upward pressure and they rose at an 8.1% rate while dairy product prices surged at an 13.2% rate during the last three months.

Less food & energy consumer prices beat expectations, slightly, with a 0.3% increase which matched the June rise. During the last three months the increase in core prices accelerated to a 3.5% annual rate which was the quickest since mid-2006.

Core goods prices jumped 0.5%, the fastest m/m increase since 1999. On a three-month basis prices rose at an accelerated 1.7% rate, the fastest since late 2004. Higher apparel prices led the recent strength with a 1.2% (0.7% y/y) increase. Prices for household furnishings & operations also were firm and they rose 0.4% (0.8% y/y). Prices for new & used motor vehicles nudged up 0.2% but they were down 0.3% year-to-year. In July, tobacco prices jumped 1.2% (7.7% y/y).

Core services prices again were firm and they rose 0.3%. That lifted the three-month growth rate to 4.1%, the fastest in two years. Public transportation prices remained strong. They posted a 1.1% July increase (14.5% y/y), rising at a 31.2% annual rate during the last three months. Medical care services prices rose a reduced 0.2% (4.1% y/y) and shelter prices also rose just 0.2% (2.5% y/y) in July. That was the weakest y/y gain since early 2006. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, nudged up 0.1% (2.6% y/y) and rents rose 0.3% (3.7% y/y). Education costs rose another 0.5% (5.7% y/y) after a 2.4% rise during all of 2007.

The chained CPI, which adjusts for shifts in consumption patterns, rose 0.4%. Less food and beverages chained prices rose 0.2%.

Consumer Price Index (%) July June Y/Y  2007 2006 2005
Total  0.8 1.1 5.6 2.9 3.2 3.4
Total less Food & Energy 0.3 0.3 2.5 2.3 2.5 2.2
  Goods less Food & Energy 0.5 0.1 0.6 -0.4 0.2 0.5
    Services less Energy 0.3 0.4 3.3 3.4 3.4 2.8
  Energy 4.0 6.6 29.3 5.6 11.0 17.0
  Food & Beverages 0.9 0.7 5.8 4.0 2.3 2.5
Chained CPI: Total (NSA)  0.4 0.8 4.8 2.5 2.9 2.9
 Total less Food & Energy  0.2 0.1 2.2 2.0 2.2 1.9
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