Wednesday, September 16, 2009

Consumer Prices (August)

Marketwatch reports:

In the past 12 months, the consumer price index has fallen 1.5%, largely because energy prices have dropped 23% over that period.

Core consumer prices - which exclude food and energy prices to get a better look at underlying inflation - rose 0.1% in August. The core CPI is up 1.4% in the past year, the smallest year-over-year gain since February 2004.

Both the CPI and the core CPI came in a tenth of a percentage point higher than estimated by economists surveyed by MarketWatch ahead of the report.

Core prices were held down by a 1.3% decline in new car prices, reflecting the discounts given to buyers that were subsidized by the government's cash-for-clunkers program. It was the largest monthly decline in car prices in 37 years.

Not noted here is the spike in used car prices. As detailed on EconomPic previously, when you take the supply of future used cars away (i.e. by "clunking" them), the price jumps... 25.3% annualized in fact. And used cars are not inconsequential; they make up more than 1/3 the level of new cars.

Now to the charts...

Year over Year CPI

CPI is beginning to level (and turn) in year over year figures. Looking at the breakdown of CPI, we see transportation costs (mainly fuel) being the driver. As high oil prices begin to fall off the year over year baseline, expect headline CPI to begin moving up, even if core prices continue to move down due to economic weakness.

Source: BLS

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