The Consumer Price Index is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. Why Investors Care
| Released on 5/15/07 For Apr 2007 | |||||||||||||||||||||||||
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Highlights
For April, overall consumer price inflation remained high due to higher energy prices while the core CPI firmed slightly. The overall consumer price index in April increased 0.4 percent, following a 0.6 percent jump in March. April's overall number was below the consensus projection for a 0.5 percent rise in the overall CPI. The core CPI firmed slightly with a 0.2 percent increase in April, following a 0.1 percent rise in March. The consensus forecast was for a 0.2 percent increase in the core rate for April.
Year-on-year, the overall CPI edged down to up 2.6 percent in April, decreasing from up 2.8 percent in March. The core rate slipped to up 2.4 percent on a year-on-year basis, compared to up 2.5 percent in March.
Energy prices pushed up the overall CPI as expected while food price inflation firmed. In the non-expenditure category for energy, prices increase 2.4 percent, following a 5.9 percent surge in March. Fuel oil increased 2.1 percent and motor fuel prices jumped another 4.7 percent. Piped gas and electricity actually dipped 0.2 percent. Food and beverages price inflation remained strong in April with a 0.4 percent boost, following a 0.3 percent increase in March.
The core CPI rose slightly to 0.2 percent, following a 0.1 percent rise in April. The core, however, was moderate - just not as low as in March. Unrounded, the core CPI rose 0.17729 percent in April, following a 0.06120 percent increase in March. Helping keep the core rate modest was a 0.2 percent rise in the owners' equivalent rent subcomponent of housing-which had risen 0.3 percent the month before. Also, apparel fell 0.3 percent, new & used motor vehicles slipped 0.1 percent, public transportation fell 0.4 percent (largely airline fares), and tobacco products dropped 0.4 percent. On the upside, medical care costs jumped 0.4 percent in April, following a 0.1 percent rise in March.
Today's CPI report is positive for both bonds and equities. This is a second good month for the core CPI-especially since it was rounded up to get to 0.2 percent instead of rounded down. Still, the Fed will be on hold, waiting for more confirmation that inflation is down. But, today, the markets should enjoy the data.
The consumer price index jumped 0.6 percent in March, following a 0.4 percent rise in February, with energy components causing most of the damage. The core CPI eased to a 0.1 percent increase in March, following a 0.2 percent rise in February. After last week's flat and favorable core PPI, markets will be hoping for a similar CPI number for April.
CPI Consensus Forecast for April 07: +0.5 percent
Range: +0.4 to +0.6 percent
CPI ex food & energy Consensus Forecast for April 07: +0.2 percent
Range: +0.1 to +0.3 percent
![[Chart]](chart.gif)
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It is always a good idea to look at more than a few months of data to get a sense of changes in established trends. Monthly changes in the CPI are mainly volatile because of sharp fluctuations in food and energy prices. The core CPI eliminates the sharper fluctuations. |
![[Chart]](chart_1.gif)
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Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core CPI does not fluctuate as much as the total CPI. |
| 2007 Release Schedule | ||||||||||||||||||||||||||
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