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Economy in Brief

U.S. CPI Declines; Core Increase Is Stable M/M But Trend Increases
by Tom Moeller   July 15, 2011

The inflation picture brightened slightly last month. The overall CPI declined 0.2%, the first decline in twelve months. The drop compared to Consensus expectations for a 0.1% slip. On a three-month basis prices rose at a moderated 1.5% annual rate. However, there was some reason for worry within the report. The trend in core inflation picked up as prices less food & energy rose another 0.3% versus an expected 0.2%. On a three-month basis, the 2.9% gain (AR) was the strongest in three years.

Lower energy prices led the moderation in the overall June CPI with a 4.4% decline. Gasoline prices fell 6.8% (+35.6% y/y). Food & beverage costs rose a moderated 0.2% (3.6% y/y). Prices of meats, poultry & fish fell 0.4% (+7.2% y/y) following four consecutive months of greater than 1.0% rise.

For goods alone, core prices rose 0.5% for the second consecutive month. Strength in apparel prices led the gain with a 1.9% increase (1.9% y/y) after May's 1.0% rise. Vehicle prices rose 1.0% (3.9% y/y), also for the second month. Furniture prices were essentially unchanged but the y/y decline moderated to -0.4% from -3.1% one year ago. 

Core service prices ticked up 0.1% (1.6 y/y) last month. Education costs rose 0.3% (3.8% y/y) while medical care service prices rose 0.3% (2.9% y/y) for the third straight month. Public transportation costs fell 2.2% (+5.6% y/y). Shelter costs, which are 32% of the CPI, rose 0.2% for the second month but the y/y change improved to 1.2%. Owners equivalent rent of primary residences, a measure not equivalent to other house price measures, rose a strengthened 0.2% (1.0% y/y). 

The chained CPI, which adjusts for shifts in consumption patterns, slipped 0.1% (+3.4% y/y). Chained prices less food & energy ticked up 0.1% m/m and by 1.4% y/y.

The consumer price data is available in Haver's USECON database while detailed figures can be found in the CPIDATA database. The expectations figure is the AS1REPNA database.

Macroeconomic Policy and Labor Markets: Lessons From Dale Mortensen's Research from the Federal Reserve Bank of Chicago can be found here.

Consumer Price Index (%) Jun May Apr Jun Y/Y 2010 2009 2008
Total -0.2 0.2 0.4 3.6 1.6 -0.3 3.8
Total less Food & Energy 0.3 0.3 0.2 1.6 1.0 1.7 2.3
  Goods less Food & Energy 0.5 0.5 0.4 1.6 1.1 1.3 0.1
  Services less Energy 0.1 0.2 0.1 1.6 0.9 1.9 3.1
 Energy -4.4 -1.0 2.2 19.6 9.6 -18.2 13.7
 Food & Beverages 0.2 0.4 0.4 3.6 0.8 1.9 5.4
Chained CPI: Total (NSA) -0.1 0.4 0.6 3.4 1.5 -0.1 3.7
 Total less Food & Energy 0.1 0.2 0.2 1.4 0.7 1.5 2.0
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