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Economy in Brief

CPI Ticks Higher For Month And Decelerates Y/Y
by Tom Moeller   October 15, 2010

Pricing is stuck in the moderate demand and abundant supply environment of the U.S. economy. Consumer prices rose 0.1% last month and failed to meet expectations for a 0.2% rise. The weakness of the increase lowered the y/y change to 1.1%, its smallest since last autumn. During the first nine months of this year prices rose at a 0.7% annual rate. The moderate pricing story does not end here. The CPI excluding food & energy was unchanged for the second consecutive month during September and that too fell short of Consensus expectations. So far this year core prices have risen at a 0.6% annual rate.

Earlier strength in energy prices lost strength last month and posted just a 0.7% increase, down sharply from the prior two months. Since December, energy prices have been roughly unchanged. Gasoline prices rose 1.6% last month but they're roughly unchanged this year (5.1% y/y). Natural gas & electricity prices fell 0.8% (+1.5%y/y) while fuel oil prices (NSA) rose 1.0% (12.3% y/y). Food & beverage prices rose 0.3% last month reflecting strength in meat prices (4.7% y/y) as well as dairy products (2.9% y/y). Reflecting the weak economy, the cost of eating out rose just 1.4% y/y.

Core consumer pricing power remained under wraps as prices excluding foods & fuel were unchanged for the second consecutive month. That lowered the y/y gain to 0.8%, the least since 1960. A 0.1% September uptick had been expected. Year-to-date prices rose at an even slower 0.6% annual rate. Core goods prices are unchanged since December, despite a 6.9% rise in tobacco prices. New and used motor vehicle prices have risen 2.1% this year while prices of home furnishings & operation fell 3.0%. Apparel prices fell 1.4%.

Core services prices also have shown little strength this year. They rose just 0.1% last month and at a 0.8% rate since December. Medical care continued as an area strength posting a 0.8% increase and a 3.9% (AR) gain since December. Education costs slipped m/m but they too have been strong posting a 4.0% gain (AR) this year. Easier shelter costs have offset this strength and have fallen at a 0.3% rate this year. Owners equivalent rent of primary residences, a measure not equivalent to other house price measures, has been unchanged after a 2.1% gain in 2009. These latest readings are the weakest since the series' start in 1983. Public transportation costs also have risen at just a 1.1% rate this year.

The chained CPI, which adjusts for shifts in consumption patterns, ticked up 0.1% for the second consecutive month and rose 0.9% year-to-year. Chained prices less food & energy also ticked 0.1% higher and were up only 0.5% y/y.

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

Improving Survey Measures of Household Inflation Expectations from the Federal Reserve Bank of New York is available here.

Consumer Price Index (%) September August July Sept. Y/Y 2009 2008 2007
Total  0.1 0.3 0.3 1.1 -0.3 3.8 2.9
Total less Food & Energy 0.0 0.0 0.1 0.8 1.7 2.3 2.3
  Goods less Food & Energy -0.2 0.1 0.2 0.7 1.3 0.1 -0.4
  Services less Energy 0.1 0.0 0.1 0.8 1.9 3.1 3.4
 Energy 0.7 2.3 2.6 3.9 -18.1 13.7 5.6
 Food & Beverages 0.3 0.1 -0.0 1.4 1.9 5.4 3.9
Chained CPI: Total (NSA)  0.1 0.1 -0.0 0.9 -0.1 3.7 2.5
 Total less Food & Energy  0.1 0.1 -0.0 0.5 1.5 2.0 1.9
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