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Economy in Brief

CPI Headline Pops but Core Rate Flat Lines
by Robert Brusca September 16, 2009

Headline rises 0.4% core rises 0.1% for second month in a row

The summary table shows that inflation remains contained for the most part. Energy prices rose 8.5% in August slamming the headline and lien items with energy in them. But core CPI trends remain controlled. Inflation diffusion rose above 50 to 58.9 in August implying that inflation rose m/m in more CPI categories than it fell. But core diffusion was at 48.6 implying that inflation FELL m/m in more CORE categories in which it rose and that was with the core pace at +0.1%. That is pretty impressive.

Over three-months: Red figures in the table above flag four top panel categories as having accelerating inflation over three-months: Food and beverages where inflation has ‘risen’ to -0.2% from -1.1% over six months; Housing where at -0.6% over three months inflation compares to a pace of -0.8% over six months; Apparel and upkeep where the inflation’s pace shot up to 4.8% over three-months compared to 1.2% over six months; and, transportation where energy prices are at work driving the price index up at a 30% pace over three-months compared to 12.6% over six months. On balance these are not worrisome developments Transportation is mostly energy prices, housing costs are tame despite being hit by rising utilities and energy costs, food and beverage prices are still falling despite ‘accelerating.’ Apparel prices we will see about; but the series is very volatile and prices tend to run hot and cold without much trend; indeed despite the high 3-month trend, apparel prices fell in the month are up by only 0.6% Yr/yr.

These observations underscore several points: that energy inflation is not always passed along and that it is hard to tell price volatility from true inflation in the month-to-month reports. So we use the diffusion results to help guide us and they are very good this month.


Core Services: Core inflation for services (excluding energy) appears to be mostly steady at the 1.5% level or so. Twelve month six-month and three-month inflation trends all converge around that 1.5% pace which is a very low pace for the service sector where productivity is lower than for goods making input price pressures harder to fight-off. Still, all that is going well.

Core Goods: Core goods inflation (excluding food and energy) had spurted early in the year but it is settling down. Three-month and Yr/Yr inflation rates are right at the 1% mark but over six months core goods inflation is still a bit higher at 2.7%, and it is still coming down from its cyclical peak rate. The trends are good.


Consumer Prices: 2009 August Report
Overview: Controlled after last month's spurting headline
Quick Summary         Year-To-Date One Mo. Mo/Mo
  Yr/Yr 6-Mo a.r. 3-Mo a.r.   2009 2008 Diffusion Aug.2009
CPI -1.4% 2.3% 4.9% -- 2.7% 4.9% 58.9 NOT
Core CPI 1.5% 1.9% 1.4% -- 1.9% 2.4% 48.6 Annualized
Commodity Category Mon a.r.   Annualized Inflation Rate For Last:  
By Expenditure Category Aug.2009 % Weight 3-Mos   6-Mos   Year Month
All Items 5.5% 100.00 4.9% -- 2.3% -- -1.4% 0.4%
Food and Beverages 1.1% 16.20 -0.2% -- -1.1% -- 0.6% 0.1%
Housing 0.6% 39.98 -0.6% -- -0.8% -- -0.6% 0.1%
Apparel & Upkeep -1.1% 4.45 4.8% -- 1.2% -- 0.6% -0.1%
Transportation 31.5% 17.57 30.1% -- 12.6% -- -10.7% 2.3%
Medical care 3.5% 5.81 2.7% -- 3.1% -- 3.3% 0.3%
Recreation 1.3% 5.91 2.4% -- 2.9% -- 3.7% 0.5%
Educucation & Communication 2.0% 5.31 2.5% -- 3.2% -- 3.2% 0.2%
Other Goods & Services 1.1% 4.77 4.6% -- 13.1% -- 7.4% 0.1%
By Industry Group
Nondurables (NSA) 20.9% 31.26 17.4%   6.2%   -5.5% 1.6%
Durables -7.3% 10.57 -1.2%   0.5%   -1.5% -0.6%
Services 2.4% 58.17 1.1%   0.5%   0.7% 0.2%
By Economic Group
All: Excl Food & Energy 0.8% 77.10 1.4%   1.9%   1.5% 0.1%
(Median Increase) 1.2% 100.00 0.9%   0.9%   0.8% 0.1%
Excl. Energy 0.9% 92.32 1.1%   1.4%   1.3% 0.1%
Commodities: Excl Food & Energy -3.6% 22.77 1.0% (29% of core) 2.7%   1.1% -0.3%
Services: Excl Energy 2.6% 54.33 1.6% (71% of core) 1.6%   1.6% 0.2%
Core CPI less Tobacco 0.8%   1.3%   1.4%   1.2% 0.1%
Food & Energy
Energy 167.6% 7.68 148.5%   42.2%   -30.8% 8.5%
Food 1.0% 15.22 -0.5%   -1.4%   0.4% 0.1%
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