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Economy in Brief

U.S. CPI Is Strong With Higher Energy & Food Costs; Core Pricing Firms
by Tom Moeller  February 17, 2011

Pricing power improved last month -- everywhere. The Consumer Price Index rose 0.4% in January, the same as in December, but generally higher than prior months. Consensus expectations were for a 0.3% rise. Core price inflation bumped up as the CPI less food & energy rose 0.2%, its strongest increase since October 2009. Consensus expectations were for a 0.1% uptick. The latest figures reflect benchmark revisions of seasonal factors.

Energy prices posted a 2.1% gain last month and by 7.5% y/y. Home heating oil prices led the increase with a 5.4% jump (NSA, 11.8% y/y) while gasoline prices advanced 3.5% for the month and by 13.4% from 12-months earlier. Prices for natural gas & electricity fell 0.6% and by 0.6% y/y. Food & beverage prices firmed with a 0.5% increase, the strongest gain since September 2008. Strength in fruits & vegetables (2.3% y/y) and meat, poultry, fish & eggs (6.2% y/y) prices lifted the monthly gain.

Core consumer pricing power firmed last month by 0.2% after months of virtually no-change. The 12-month gain improved to 0.9%. For goods alone, prices rose 0.2% after four consecutive months of slight decline. A 1.0% (-0.0% y/y) increase in apparel led the latest rise. Prices for household furnishings & operation ticked up 0.1% (-2.3% y/y) while new and used motor vehicle prices slipped for the fifth straight month (+0.5% y/y).

Pricing power for core services also improved. The 0.1% increase caused the y/y gain to rise to 1.4%. To the upside, public transportation costs again led last month's gain with a 1.7% increase (7.7% y/y). Education costs were strong and posted a 0.6% increase (4.2% y/y). Shelter costs, which are 32% of the CPI, rose 0.1% for the fourth straight month, however, the y/y change improved to 0.6% due to declines early last year. Owners equivalent rent of primary residences, a measure not equivalent to other house price measures, ticked up 0.1% while the y/y increase improved to 0.5% after no change last year. Nevertheless, the reading remained the weakest since the series' start in 1983. Medical care prices slipped 0.1% (+3.0% y/y).

The chained CPI, which adjusts for shifts in consumption patterns, rose 0.5% and 1.4% year-to-year. Chained prices less food & energy ticked up 0.1% m/m but rose 0.7% 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 (%) Jan Dec Nov Jan Y/Y 2010 2009 2008
Total 0.4 0.4 0.1 1.6 1.6 -0.3 3.8
Total less Food & Energy 0.2 0.1 0.1 1.0 1.0 1.7 2.3
  Goods less Food & Energy 0.2 -0.1 -0.0 -0.2 1.1 1.3 0.1
  Services less Energy 0.1 0.1 0.2 1.4 0.9 1.9 3.1
 Energy 2.1 4.0 0.1 7.5 9.6 -18.2 13.7
 Food & Beverages 0.5 0.1 0.1 1.8 0.8 1.9 5.4
Chained CPI: Total (NSA) 0.5 0.2 0.0 1.4 1.5 -0.1 3.7
 Total less Food & Energy 0.1 -0.2 -0.0 0.7 0.7 1.5 2.0
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