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Economy in Brief

U.S. CPI Gain Is Surprisingly Strong; Core Increase Eases
by Tom Moeller   August 18, 2011

Price inflation accelerated last month, but its makeup was somewhat mixed. The overall CPI gained 0.5% following June's 0.2% decline. A 0.2% increase was expected. Despite the July strength, the three-month gain in prices eased to 1.8% (AR), down sharply from its 6.2% April peak. Excluding food and beverages, prices gained an expected 0.2% last month after a 0.3% June rise. On a three-month basis, however, price gains continued higher to a 3.1% rate, the highest since early-2008.

Higher energy prices led last month's strength in the CPI with a 2.8% rise. Gasoline prices rose 4.7% (33.6% y/y) following two months of decline. Food & beverages were again strong. However, the 0.4% m/m rise still left the three-month gain lower at 3.8%. Dairy product prices jumped 1.2% (7.9% y/y) and prices of meats, poultry & fish rose a firm 0.5% (7.4% y/y). These gains were offset by a 0.1% decline in cereal prices (4.3% y/y).

For goods alone, core prices rose 0.3% after two months of 0.5% increase. Apparel prices firmed for the third straight month and posted a 1.2% increase (3.0% y/y). This strength was offset, however, by a 0.1% uptick in vehicle prices (3.9% y/y). Furniture prices were unchanged for the second month. They're essentially unchanged y/y after last year's 2.5% fall.

Core service prices rose 0.2% (1.7 y/y) last month. Education costs rose 0.7% (4.0% y/y) but that y/y gain is below the 6%-to-7% increases in the early 2000s. Medical care service prices rose 0.3% (3.2% y/y) for the fourth straight month. Public transportation costs slipped 0.2% (+6.0% y/y) for the third consecutive month of decline. Shelter costs, which are 32% of the CPI, rose 0.3% and the y/y change improved further to 1.4%. Owners equivalent rent of primary residences, a measure not equivalent to other house price measures, rose a strengthened 0.3% (1.2% y/y).

The chained CPI, which adjusts for shifts in consumption patterns, ticked up 0.1% (3.5% y/y). Chained prices less food & energy also rose 0.1% m/m and by 1.6% y/y.

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

Consumer Price Index (%) Jul Jun May Jul Y/Y 2010 2009 2008
Total 0.5 -0.2 0.2 3.6 1.6 -0.3 3.8
Total less Food & Energy 0.2 0.3 0.3 1.8 1.0 1.7 2.3
  Goods less Food & Energy 0.3 0.5 0.5 1.8 1.1 1.3 0.1
  Services less Energy 0.2 0.1 0.2 1.7 0.9 1.9 3.1
 Energy 2.8 -4.4 -1.0 19.0 9.6 -18.2 13.7
 Food & Beverages 0.4 0.2 0.4 4.0 0.8 1.9 5.4
Chained CPI: Total (NSA) 0.1 -0.1 0.4 3.5 1.5 -0.1 3.7
 Total less Food & Energy 0.1 0.1 0.2 1.6 0.7 1.5 2.0
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