U.S. CPI: Broad-Based Declines For Third Straight Month

Broad-based weakness in pricing power continues to accompany moderate U.S. economic growth. The June Consumer Price Index fell 0.1% (+1.1% y/y) for the third consecutive monthly decline. During the first six months of this year prices fell at a 0.3% annual rate. The latest figure fell short of Consensus expectations for a 0.1% increase.

A 2.9% drop in energy prices was behind much of last month's total decline. It was the fifth consecutive monthly slip and the latest was powered by a 4.5% decline (+3.9% y/y) in gasoline prices. Fuel oil prices also fell 2.6% (+14.1% y/y) while natural gas & electricity prices dropped 1.6% (+0.8% y/y). Food & beverage prices also were weak posting little change for the second straight month. A 1.3% decline (-0.2 y/y) in fruit & vegetable prices offset a 1.0% rise (2.0% y/y) in meats, poultry, fish & egg prices. The cost of eating out rose 0.1% (1.2% y/y) for the second month. 

Core consumer pricing power picked up minimally. A 0.2% increase in prices less food & energy followed seven consecutive months of little change. A 0.1% uptick had been expected. Year-to-date prices rose at a 0.6% annual rate. Core goods prices rose 0.2% (1.0% y/y) for the first solid increase this year. A 1.0% increase (8.0% y/y) in tobacco prices led the gain. Apparel prices increased 0.8% (-0.4% y/y) while prices of home furnishings & operation declined by 0.4% (-3.1% y/y). New & used motor vehicles prices increased 0.3% (+4.4% y/y).

Core services prices rose 0.1% (1.0% y/y) for the fourth month in the last five. Public transportation costs fell 0.5% (+10.9% y/y) after two months of sharp increase. Education prices rose 0.4% (4.8% y/y) following years of 5-6% annual increase while medical care services prices increased a firm 0.4% (3.5% y/y).  Weakness in the housing market left shelter prices up just 0.1% but down 0.5% y/y. Owners equivalent rent of primary residences, a measure not equivalent to other house price measures, ticked 0.1% higher (-0.2% y/y). The slight y/y decline in this measure was the weakest reading since the series' start in 1983. Medical care services prices again rose 0.3% (3.7% y/y).

The chained CPI, which adjusts for shifts in consumption patterns, slipped last month and rose 0.8% year-to-year. Chained prices less food & energy were unchanged, up only 0.6% 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 (%)	June	May	April	June Y/Y	2009	2008	2007
Total	-0.1	-0.2	-0.1	1.1	-0.3	3.8	2.9
Total less Food & Energy	0.2	0.1	0.0	1.0	1.7	2.3	2.3
Goods less Food & Energy	0.2	0.1	-0.3	1.0	1.3	0.1	-0.4
Services less Energy	0.1	0.1	0.2	1.0	1.9	3.1	3.4
Energy	-2.9	-2.9	-1.4	3.0	-18.1	13.7	5.6
Food & Beverages	-0.0	0.0	0.2	0.7	1.9	5.4	3.9
Chained CPI: Total (NSA)	-0.2	0.1	0.2	0.8	-0.1	3.7	2.5
Total less Food & Energy	0.0	-0.0	0.0	0.6	1.5	2.0	1.9

 

U.S. Consumer Sentiment Falls Sharply
by Tom Moeller July 16, 2010

Consumers aren't upbeat about much these days. As of mid-July, the University of Michigan reported that its consumer sentiment measure dropped sharply from June to 66.5 which was the lowest reading since last August. Nevertheless the index level remained up 20.3% since the low in November 2008. During the last ten years there has been an 89% correlation between the level of sentiment and the y/y change in real consumer spending.

The expectations index dropped sharply m/m but remained up a modest 12.4% from the 2008 low. The readings for expected business conditions during the next year (-5.8% y/y) and expectations for business conditions during the next five years (0.0% y/y) both fell sharply from June. Expectations for personal finances also fell hard from June (-6.4% y/y).

Expected price inflation during the next year ticked higher to 3.6% and remained up from the December 2008 low of 1.7%. Respondents' view of government policy, which may eventually influence economic expectations, retraced the gains of the prior two months and remained down sharply from its high last May. Fifteen  percent of respondents thought that a good job was being done by government versus 42% who thought a poor job was being done.

Sentiment about current economic conditions also fell sharply from June to the lowest level since November. The assessment of current personal finances reversed its improvement (7.1% y/y) since February while perceived buying conditions for large household goods, including furniture, refrigerators, stoves & televisions fell hard to the lowest level since November (8.1% y/y).

The Reuters/University of Michigan survey data are not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end. The summary indexes are in Haver's USECON database with details in the proprietary UMSCA database.

University of Michigan	Mid- July	June	May	June Y/Y	2009	2008	2007
Consumer Sentiment	66.5	76.0	73.6	0.8%	66.3	63.8	85.6
Current Economic Conditions	75.5	85.6	81.0	7.1	69.6	73.7	101.2
Expectations	60.6	69.8	68.8	-4.1	64.1	57.3	75.6