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Economy in Brief

U.S. CPI: Broad-Based Weakness Is Behind Slight M/M Decline
by Tom Moeller May 19, 2010

Moderate economic improvement since the middle of last year has done nothing to improve retail pricing power. The Consumer Price Index for April fell 0.1% (+2.2% y/y) and reversed a modest 0.1% uptick in March. The latest figure fell short of Consensus expectations for a 0.1% gain. Moreover, continuing weak was the 0.5% (AR) CPI increase so far this year.

A 1.4% drop in energy prices was behind much of last month's total decline, the third consecutive monthly slip. A 4.4% drop (-2.9% y/y) in natural gas prices led the decline followed by a 2.4% drop in gasoline prices (+38.3% y/y). Higher fuel oil prices (28.0% y/y) offset much of these declines along with an uptick in electricity costs (0.6% y/y).

Core consumer prices also were weak. They were unchanged for the second consecutive month. A 0.1% increase had been expected and prices have gained just 0.1% since October. Core goods prices led the weakness with a 0.3% decline, the third consecutive monthly shortfall. Lower apparel prices fell by a sharp 0.7% (-0.9% y/y) while prices of home furnishings & operation declined by 0.5% (-2.8% y/y). New & used motor vehicles prices rounded off the weakness and slipped 0.2% (+4.9% y/y). Tobacco prices nudged up 0.1% (6.1% y/y).

Core services prices strengthened marginally and rose 0.2% (0.9% y/y). That improvement was led by a quickened 1.7% increase (8.4% y/y) in the cost of public transportation. The 0.3% increase in recreation prices also was a bit improved (-0.4% y/y). Elsewhere, weakness in the housing market left shelter prices unchanged and down 0.6% y/y. Owners equivalent rent of primary residences, a measure not equivalent to other house price measures, slipped again m/m (-0.2% y/y). The slight y/y decline in this measure was the weakest reading since the series' start in 1983. Elsewhere in services, education costs rose 0.5% (5.0% y/y) and medical care services prices again rose 0.3% (3.7% y/y).

Food & beverage prices again firmed a bit by 0.2% and the y/y gain of 0.5% was improved from late-last year's low of -0.5%. Dairy prices firmed by 0.1% y/y versus the 10.4% decline last summer. Also showing less deflation were prices for meats, poultry, fish & eggs (-0.2% y/y) but cereal & bakery product prices continued weak (-0.9% y/y). Fruit & vegetable prices slipped m/m but the 1.8% y/y increase is improved from a 6.5% decline as of last summer. Finally, the cost of eating out rose just 1.1% y/y, a record low increase, while alcoholic beverage prices also rose just 1.2% y/y, the least since 1995.

The chained CPI, which adjusts for shifts in consumption patterns, eased last month and rose 2.3% year-to-year. Chained prices less food & energy gained just 0.6% y/y.

The consumer price data is available in Haver's USECON database while detailed figures can be found in the CPIDATA database.

Consumer Price Index (%) April March February April y/y 2009 2008 2007
Total  -0.1 0.1 0.0 2.2 -0.3 3.8 2.9
Total less Food & Energy 0.0 0.0 0.1 1.0 1.7 2.3 2.3
  Goods less Food & Energy -0.3 -0.1 -0.1 1.2 1.3 0.1 -0.4
    Services less Energy 0.2 0.1 0.1 0.9 1.9 3.1 3.4
  Energy -1.4 -0.0 -0.5 18.0 -18.1 13.7 5.6
  Food & Beverages 0.2 0.2 0.0 0.5 1.9 5.4 3.9
Chained CPI: Total (NSA)  0.2 0.4 -0.0 2.3 -0.1 3.7 2.5
 Total less Food & Energy  0.0 0.2 0.2 0.6 1.5 2.0 1.9
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