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 5/14/08 For Apr 2008 | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Highlights
Consumer price inflation in April came in better-than expected with energy coming in temporarily flat. The April CPI moderated with a 0.2 percent increase, after a 0.3 percent boost the month before. The market consensus had expected a 0.3 percent gain. The core rate also eased to a 0.1 percent rise, after a 0.2 percent advance the prior month before and came in below the consensus forecast for a 0.2 percent rise. Inflation weakness was in motor vehicles, lodging away from home, and household furnishings. Strong price gains were seen in food and apparel. Overall, the April CPI report reflects a variety of factors that include softening demand for some goods, temporary lagged effects on monthly swings in energy, and higher commodity prices underlying higher costs for others. Initially, credit markets liked the report with interest rates easing somewhat. But the underlying trends are likely unchanged. Current economic sluggishness is damping some component gains and those are likely to be reversed as the economy improves in the second half of the year and underlying commodity costs are likely to remain.
By components, the softening in CPI was led by transportation which declined 0.7 percent in April. This included a 1.9 percent drop in motor fuel, a 0.5 percent dip in airline fares (which have since headed up), and a 0.2 percent decrease in motor vehicle prices. Recreation fell 0.1 percent, led by drops in costs for video and audio.
But some components were strong, notably a 0.9 percent surge in food & beverage costs. Also, apparel rebounded 0.5 percent and education & communication rose 0.4 percent.
The special expenditure category for energy was flat in April after a 1.9 percent spike in March. April's weakness was led by the earlier mentioned drop in motor fuel. However, heating oil rose 3.6 percent and piped gas & electricity increased 2.5 percent. In coming months, motor fuel is likely to rise in response to higher oil prices.
Year-on-year, the overall CPI slipped to up 3.9 percent in March from up 4.0 percent in March. The core rate was eased to up 2.3 percent from up 2.4 percent the prior month.
Overall, the March CPI report was quite mixed although the net effect was for at least a temporary improvement in CPI inflation. Given recent trends in oil and other commodity prices, it is going to take a notable softening in demand to keep inflation soft. This has some chance of succeeding over the next few months but is doubtful later in the year.
The consumer price index may be back on an upward track after some brief improvement earlier this year. The March CPI rose 0.3 percent, after no change in February. The core rate also firmed after a flat reading the month before. The latest gain in the headline CPI was led by energy components, including gasoline and heating oil. The trend in headline inflation clearly is worrisome for the Fed despite the recent string of interest rate cuts. On a year-on-year basis, the overall CPI came in at up 4.0 percent in March. Higher gasoline prices, food prices, and air fares will likely lead the way for another sizeable gain in headline CPI inflation.
CPI Consensus Forecast for April 08: +0.3 percent
Range: +0.1 to +0.4 percent
CPI ex food & energy Consensus Forecast for April 08: +0.2 percent
Range: +0.1 to +0.4 percent
![[Chart]](chart.gif)
|
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)
|
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. |
| 2008 Release Schedule | ||||||||||||||||||||||||||
|
powered by
![[Econoday]](../../../../../../../../../images/logo.gif){kind=logo}