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Economy in Brief

U.S. CPI Declines With Energy; Core Is Stable & Low
by Tom Moeller  November 16, 2011

The ability to raise prices in this modest economic growth environment is virtually nonexistent. The October Consumer Price Index slipped 0.1% following three months of elevated increase. The decline compared with expectations for no change. Consumer prices less food & energy also were tame, posting a second consecutive 0.1% uptick. The gain matched expectations. Over several months, price inflation indeed remained subdued. On a three-month basis, the CPI is up at a 2.4% annual rate and is lower than its April peak of 6.2%. The 1.8% increase in core prices is down as well from its 3.1% July peak.

A 2.0% decline in energy prices led the CPI lower last month. Gasoline prices fell 3.1% (+23.5% y/y) and reversed two months of increase. Fuel oil prices edged up a not seasonally adjusted 0.1% (21.2% y/y) following five months of decline. Food & beverages rose 0.2%, the easiest increase in four months. Nevertheless, the 4.7% y/y gain remained the strongest since early-2009. Strength versus last year continued in cereal products (9.8%) and dairy products (9.1% y/y).

For goods alone, core prices fell for the second consecutive month. The 0.1% dip lessened the three-month gain to 0.2% (AR) from its June peak of 5.9%.  Apparel prices rose 0.4% (4.2% y/y) after the 1.1% September drop, while motor vehicle prices fell 0.4% (+3.4% y/y). Household furnishings & operations prices ticked up 0.1% (0.6% y/y).

Core service prices rose 0.2% (2.1% y/y) for the fourth straight month. Education costs rose 0.4% (4.7% y/y) while public transportation costs were essentially unchanged (+7.0% y/y). Medical care service prices rose 0.5% (3.1% y/y). Shelter costs, which are 32% of the CPI, rose 0.2% but the y/y change edged up to 1.8% versus its 0.4% dip last year. Owners equivalent rent of primary residences, a measure not equivalent to other house price measures, edged up 0.2%. The 1.6% y/y increase is up from its lowest of no-change for all of last year.

The chained CPI, which adjusts for shifts in consumption patterns, rose 0.1% (3.7% y/y). Chained prices less food & energy rose 0.2% m/m and by 1.8% 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 (%) Oct Sep Aug Oct Y/Y 2010 2009 2008
Total -0.1 0.3 0.4 3.6 1.6 -0.3 3.8
Total less Food & Energy 0.1 0.1 0.2 2.1 1.0 1.7 2.3
  Goods less Food & Energy -0.1 -0.2 0.4 2.1 1.1 1.3 0.1
  Services less Energy 0.2 0.2 0.2 2.1 0.9 1.9 3.1
 Food & Beverages 0.1 0.4 0.5 4.5 0.8 1.9 5.4
 Energy -2.0 2.0 1.2 14.3 9.6 -18.2 13.7
Chained CPI: Total (NSA) -0.2 0.1 0.3 3.4 1.5 -0.1 3.7
 Total less Food & Energy 0.2 0.2 0.3 1.9 0.7 1.5 2.0
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