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 8/14/08 For Jul 2008 | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Highlights
Consumer price inflation in July slowed at the headline level from a red hot June pace but remains very strong. Meanwhile, core inflation remains above trend as higher production costs appear to be feeding through. The headline CPI posted a 0.8 percent gain, following a 1.1 percent spike the month before. July's increase was sharply above the market projection forecast for a 0.4 percent rise. The core rate remained elevated with a 0.3 percent boost, matching June's gain and topping the consensus forecast for a 0.2 percent increase. Gains were widespread by major categories except for medical care.
Year-on-year, the overall CPI jumped to 5.5 percent (seasonally adjusted) in July from 5.0 percent in June. The core rate firmed to 2.5 percent from 2.4 percent the month before.
As in recent months, energy led the boost in overall inflation with a monthly 4.0 percent rise, following a 6.6 percent increase in June. The energy spike actually was led by a 7.4 percent jump in natural gas. Gasoline was up 4.1 percent; electricity, up 2.5 percent; and heating oil, up 1.3 percent. Food inflation continued to accelerate, rising 0.9 percent in July after a 0.8 percent jump in June.
The rise in the core rate was led by airfares, up 1.3 percent; apparel, up 1.2 percent; tobacco, up 1.2 percent; and educational books & supplies, up 0.8 percent. On the soft side within core were a 0.1 percent dip in medical care commodities, a 0.1 percent decline in used cars & trucks, and a modest rise in owners' equivalent rent of 0.1 percent. The troubling trend in the core number is that there were few signs of prices weakened by soft demand outside of used trucks. The decline in medical commodities may have been related to quality adjustments instead of to demand. A higher cost structure for businesses seems to be offsetting slowing consumer demand.
The latest inflation news is not good and it takes a good dose of hope to get beyond today's numbers. Headline inflation is still being pumped up by earlier increases in oil prices and the Fed is certainly hoping that recent declines in oil prices will ease headline inflation in coming months. But core inflation now appears to have been bumped up a notch and that certainly will be causing concern at the Fed as oil prices still remain relatively high, boosting costs for the economy as earlier oil price gains continue to be slowly passed along in pricing.
The consumer price index has been off to the races in recent months, boosted by higher energy costs. The headline CPI soared 1.1 percent in June, following a 0.6 percent surge the month before. The core rate firmed but not as dramatically with a 0.3 percent increase after a 0.2 percent rise in May. Once again, energy led the surge in overall inflation with a monthly 6.6 percent increase, following a 4.4 percent gain in May. Gasoline was up a monthly 10.1 percent after rising 5.7 percent in May. Food inflation accelerated sharply with a 0.8 percent jump in June, following 0.3 percent increase the month before. We may get some slowing in headline inflation as gasoline costs were rising less rapidly in July. But there still may be some pressure on the core number as still relatively high energy costs continue to filter into production costs.
CPI Consensus Forecast for July 08, m/m: +0.4 percent
Range: +0.2 to +0.6 percent
CPI Consensus Forecast for July 08, y/y: +5.2 percent
Range: +5.0 to +5.3 percent
CPI ex food & energy Consensus Forecast for July 08, m/m: +0.2 percent
Range: +0.1 to +0.3 percent
CPI ex food & energy Consensus Forecast for July 08, y/y: +2.4 percent
Range: +2.3 to +2.5 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}