Wednesday, August 15, 2007

Inflation Up .1%

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) was virtually unchanged in July, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The July level of 208.299 (1982-84=100) was 2.4 percent higher than in July 2006.

There are some important caveats to this statement. Ignore them if you don't consume energy or food.

Food prices increased .3% and are up at a compound annual 3-month rate of 4.3% and increased 4.1% in the last 12 months.

Energy prices decreased 1% and are up at a compound annual 3-month rate of 16% and increased 1% in the last 12 months.

The core rate (again this assumes you don't buy food or energy) 2.2% in the last 12 months.

Here's more from the report:

During the first seven months of 2007, the CPI-U rose at a 4.5 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.5 percent for all of 2006. The index for energy, which rose 2.9 percent in 2006, advanced at a 21.3 percent SAAR in the first seven months of 2007 despite registering declines in each of the last two months. Petroleum-based energy costs increased at a 36.9 percent annual rate and charges for energy services rose at a 3.8 percent annual rate. The food index has increased at a 5.7 percent SAAR thus far this year, following a 2.1 percent rise for all of 2006. Excluding food and energy, the CPI-U advanced at a 2.3 percent SAAR in the first seven months, following a 2.6 percent rise for all of 2006.

Here's how Bloomberg reported the numbers:

Consumer prices in the U.S. rose 0.1 percent in July, the smallest gain in eight months, signaling the Federal Reserve may view inflation as less of a threat.

The increase in the cost of living followed a 0.2 percent advance in June, the Labor Department said today in Washington. Core prices, which exclude food and energy, climbed 0.2 percent and were up 2.2 percent from a year earlier.

``Price pressures are declining because of a slowing economy and higher interest rates, and I think those pressures will continue to ease,'' Lindsey Piegza, an analyst at FTN Financial in New York, said before the report. ``Inflation is still at the top of the Fed's range, so the Fed continues to downplay the declines because it wants to make sure.''

And CBS.Marketwatch:

With gasoline prices falling, U.S. consumer prices increased 0.1% in July, the slowest inflation rate in eight months, the Labor Department reported Wednesday.

The core consumer price index, which excludes volatile food and energy prices, increased 0.2% for the second straight month.

The seasonally adjusted inflation figures were exactly as expected by economists surveyed by MarketWatch.

Falling energy prices, a moderate rise in housing costs and flat auto prices held the CPI down in July, partially offsetting higher prices for apparel and medical care.
The CPI is up 2.4% in the past year, while the core CPI is up 2.2%, close to the upper end of Federal Reserve's target zone.

Expect this news to encourage talk about a rate cut. However, here's why I don't think that will happen.