For all of the concern about rising prices that recently has been expressed in Washington by the Federal Reserve Board, the most recent price trends are quite favorable. That's even excluding the recent decline in gasoline prices

As on June, growth in the core (excluding food & energy) PCE chain price index has decelerated on a three month basis to 1.6% (1.9% y/y). Which is nearly half its growth rate a year ago.

Many attribute the good pricing news to the recently weak growth in GDP. Perhaps. But price inflation is first and foremost a monetary phenomenon, and the latest news comes at a time of strong growth in M2 (6.2% y/y) and MZM (8.4% y/y). Both those growth rates are roughly double the growth during last year which was up or double the growth during 2005.

Historically, the cash in one's pocket has mattered for pricing pressure as much as how fast the economy is growing. the Fed's vigilance of this is comforting.

To follow is a review of recent pricing patterns. To the upside has of course been the recent pressure on prices for food & beverages (4.0% y/y), communication (-0.8% y/y) and personal care (3.1% y/y) led by faster growth in legal fees (5.1% y/y).

Easing price pressure is perhaps more pervasive. Growth in prices for durable goods are under downward pressure such as seen for prices of new vehicles (-1.0% y/y), household furniture (-0.8% y/y) and appliances (2.45 y/y).

Nondurables prices are showing easing price pressure as well in the apparel (-1.3% y/y) and shelter (3.7% y/y) areas.

To wrap up the areas where price pressure is easing are the medical care services (5.0% y/y), public transportation (-0.4% y/y), tenants & household insurance (0.6 y/y), and education (5.7% y/y), notably tuition.

The U.S. economy always has been one where some areas experiencing rising pressure are offset by areas of slack. That suggests that one is always at risk to focus on one and not the other. The cries of "depression" in the economy several years ago ignored the strength that was then being seen in housing and personal income, although these latter areas were growing at slower rates. It's never easy.

When Did Inflation Persistence Change? from the Federal Reserve Bank of Cleveland is available here.