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Economy in Brief

t U.S. CPI: Broad-Based Declines For Third Straight Month
by Tom Moeller  July 16, 2010

Broad-based weakness in pricing power continues to accompany moderate U.S. economic growth. The June Consumer Price Index fell 0.1% (+1.1% y/y) for the third consecutive monthly decline. During the first six months of this year prices fell at a 0.3% annual rate. The latest figure fell short of Consensus expectations for a 0.1% increase.

A 2.9% drop in energy prices was behind much of last month's total decline. It was the fifth consecutive monthly slip and the latest was powered by a 4.5% decline (+3.9% y/y) in gasoline prices. Fuel oil prices also fell 2.6% (+14.1% y/y) while natural gas & electricity prices dropped 1.6% (+0.8% y/y). Food & beverage prices also were weak posting little change for the second straight month. A 1.3% decline (-0.2 y/y) in fruit & vegetable prices offset a 1.0% rise (2.0% y/y) in meats, poultry, fish & egg prices. The cost of eating out rose 0.1% (1.2% y/y) for the second month. 

Core consumer pricing power picked up minimally. A 0.2% increase in prices less food & energy followed seven consecutive months of little change. A 0.1% uptick had been expected. Year-to-date prices rose at a 0.6% annual rate. Core goods prices rose 0.2% (1.0% y/y) for the first solid increase this year. A 1.0% increase (8.0% y/y) in tobacco prices led the gain. Apparel prices increased 0.8% (-0.4% y/y) while prices of home furnishings &operation declined by 0.4% (-3.1% y/y). New & used motor vehicles prices increased 0.3% (+4.4% y/y).

Core services prices rose 0.1% (1.0% y/y) for the fourth month in the last five. Public transportation costs fell 0.5% (+10.9% y/y) after two months of sharp increase. Education prices rose 0.4% (4.8% y/y) following years of 5-6% annual increase while medical care services prices increased a firm 0.4% (3.5% y/y).  Weakness in the housing market left shelter prices up just 0.1% but down 0.5% y/y. Owners equivalent rent of primary residences, a measure not equivalent to other house price measures, ticked 0.1% higher (-0.2% y/y). The slight y/y decline in this measure was the weakest reading since the series' start in 1983. Medical care services prices again rose 0.3% (3.7% y/y).

The chained CPI, which adjusts for shifts in consumption patterns, slipped last month and rose 0.8% year-to-year. Chained prices less food & energy were unchanged, up only 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 (%) June May April June Y/Y 2009 2008 2007
Total  -0.1 -0.2 -0.1 1.1 -0.3 3.8 2.9
Total less Food & Energy 0.2 0.1 0.0 1.0 1.7 2.3 2.3
  Goods less Food & Energy 0.2 0.1 -0.3 1.0 1.3 0.1 -0.4
  Services less Energy 0.1 0.1 0.2 1.0 1.9 3.1 3.4
  Energy -2.9 -2.9 -1.4 3.0 -18.1 13.7 5.6
  Food & Beverages -0.0 0.0 0.2 0.7 1.9 5.4 3.9
Chained CPI: Total (NSA)  -0.2 0.1 0.2 0.8 -0.1 3.7 2.5
  Total less Food & Energy  0.0 -0.0 0.0 0.6 1.5 2.0 1.9
 
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