Thursday, January 18, 2007

CPI Up .5%; Core Up .2%

From the Bureau of Labor Statistics:

On a seasonally adjusted basis, the CPI-U increased 0.5 percent in December, the first advance since August. Energy prices, which had declined in each of the preceding three months, rose 4.6 percent in December. Within energy, the index for petroleum-based energy increased 7.7 percent and the index for energy services increased 1.2 percent. The food index was unchanged in December. The index for all items less food and energy, which was virtually unchanged in November, increased 0.2 percent in December. Upturns in the indexes for apparel and for tobacco and smoking products werelargely responsible for the acceleration. Shelter costs rose less than in November, but still accounted for about 80 percent of the December advance in the index for all items less food and energy.

From Bloomberg:

U.S. consumer prices accelerated in December for the first time in four months, suggesting the easing of inflationary pressures that the Federal Reserve is counting on will be slow.

The consumer price index increased 0.5 percent last month, the most since April and reflecting higher costs for gasoline and natural gas, after no change in November, the Labor Department said today in Washington. Excluding food and energy, so-called core consumer inflation rose 0.2 percent, following no change a month earlier.

Let's break these numbers down a bit.

1.) The core and total numbers same in at or slightly above expectations -- depending on whether you read Bloomberg or CBS.Marketwatch for your forecasts. So the number won't be unexpected.

2.) Transportation and energy costs were a big reason for the increase. Transportation increased 1.8% after three months of declines and overall energy prices increased 4.6% after three months of decreases. Oil has dropped in a big way since late December, meaning January's number may be much lower than December.

3.) The 12-month December to December change is 2.5%. This is still high for the Fed.

4.) Bloomberg notes this is the biggest increase since April. That's not a good development.