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Economy in Brief

CPI Stays Unchanged; Core Is Weak
by Tom Moeller March 18, 2010

Consumer price inflation can't develop forward momentum despite moderate improvement in the economy. Or maybe the economy's improving in part because inflation is so low. Either way, the U.S. Bureau of Labor Statistics reported that the February CPI was unchanged following five consecutive months of modest 0.2% increase. The latest figure was slightly below Consensus expectations for a 0.1% gain.

Prices were weak across-the-board. Energy prices slipped 0.5% though the weakness followed several months of strong increase. The latest change reflected a 1.4% m/m decline in gasoline prices but they've risen 36.8% y/y and by 58.0% since the December '08 low. Fuel oil prices slipped 1.3% (+14.5% y/y) but natural gas & electricity prices ticked up 0.5% (-4.2% y/y).

Food & beverage prices continued weak. They were unchanged last month and the y/y decline of 0.1% was near the weakest 12-month change on record. It reflected a 2.8% y/y decline in dairy prices and a 1.4% drop in fruit & vegetable costs. Also down 2.7% y/y were prices for meats, poultry, fish & eggs while cereal & bakery product prices fell 1.1%. Finally, the cost of eating out rose just 1.4%, a record low increase, while alcoholic beverage prices also rose just 1.3% y/y, the least since 1995. Sugar & sweets prices have shown strength with a 2.7% y/y increase.

Core consumer prices, goods & service together, rose just 0.1%. Earlier strength in core goods prices continued to wane. Their 0.1% February decline was the first negative reading since early in the recession. The three-month gain eased to 0.7% (AR) from a high of 5.4% last April. New & used motor vehicles prices were one of the only sources of strength and posted another firm 0.4% rise (5.3% y/y). Apparel prices have been unchanged y/y and prices for household furnishings & operation fell 1.7%.

Core services prices nudged up just 0.1% (+0.9% y/y). Weakness in the housing market caused a 0.4% y/y decline in shelter prices while owners equivalent rent of primary residences, a measure not equivalent to other house price measures, slipped again m/m (+0.3% y/y). Elsewhere in services, public transportation prices slipped 0.1% (+4.5% y/y) but medical care services prices gained another 0.4% (3.7% y/y). Finally, education costs remained strong and posted a 0.5% increase (4.7% y/y) but recreation prices slipped for the sixth straight month (-1.0% y/y).

The chained CPI, which adjusts for shifts in consumption patterns slipped slightly last month and rose 2.2% year-to-year. Chained prices less food & energy gained 0.2% and just 1.0% y/y.

Consumer Price Index (%) February January December Feb. y/y 2009 2008 2007
Total  0.0 0.2 0.2 2.2 -0.3 3.8 2.9
Total less Food & Energy 0.1 -0.1 0.1 1.3 1.7 2.3 2.3
  Goods less Food & Energy -0.1 0.1 0.1 2.5 1.3 0.1 -0.4
    Services less Energy 0.1 -0.2 0.1 0.9 1.9 3.1 3.4
  Energy -0.5 2.8 0.8 14.9 -18.1 13.7 5.6
  Food & Beverages 0.0 0.2 0.1 -0.1 -0.2 5.4 3.9
Chained CPI: Total (NSA)  -0.0 0.4 0.8 2.2 -0.4 3.3 2.5
 Total less Food & Energy  0.2 -0.0 0.1 1.0 1.3 1.9 1.9
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