December & Yr 2010 Consumer Price Index Summary

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in December on a
seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months,
the all items index increased 1.5 percent before seasonal adjustment.

The energy index increased in December. The gasoline index rose sharply and accounted for about 80
percent of the all items seasonally adjusted increase. The household energy index, which declined in
November, increased as well. The food index increased slightly in December, with the fruits and
vegetables index rising notably.

The index for all items less food and energy also rose in December. An increase in the shelter index
accounted for about 60 percent of the rise, and the indexes for airline fares, medical care and apparel
rose as well. These increases more than offset declines in the indexes for communication, recreation, and
household furnishings and operations.

Year in Review
The rate of increase in the CPI slowed in 2010 as the December to December increase fell from 2.7
percent in 2009 to 1.5 percent in 2010. A deceleration in the gasoline index accounted for much of the
slowdown, as it increased 13.8 percent in 2010 after rising 53.5 percent in 2009. The index for
household energy, which declined in 2009, rose 0.8 percent in 2010 as increases in the indexes for fuel
oil and electricity more than offset a decline in the natural gas index. The energy index as a whole,
which rose 18.2 percent in 2009, increased 7.7 percent in 2010.

November 2010 Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in November on a
seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months,
the all items index increased 1.1 percent before seasonal adjustment.

The indexes for food, energy, and all items less food and energy all increased slightly in November. The
index for food at home rose in November after being unchanged in October, with the indexes for eggs
and nonalcoholic beverages both rising notably. Although the index for gasoline rose, the index for
household energy declined and the increase in the energy index was the smallest in five months.

The index for all items less food and energy rose in November after being unchanged the previous three
months. Increases in the indexes for shelter and airline fares accounted for most of the rise, while the
indexes for new vehicles, used cars and trucks, and household furnishings and operations all declined.

Over the last 12 months, the index for all items less food and energy has risen 0.8 percent. The energy
index has risen 3.9 percent over that span with the gasoline index up 7.3 percent but the household
energy index down 0.2 percent. The food index has risen 1.5 percent, with the food at home index up 1.7
percent.

Here is a link to the entire release from the BLS.

Health Care CPI Rant

Pardon me for ranting but it is too big to ignore. One of the most explosive sources of inflation in the US economy is the cost of health insurance, now that house inflation is contained (Owners Equivalent Rent, 25% of CPI, which was flat August to September). The section of the BEA table that monitors health care costs does not seem to reflect that health insurance premiums are 15%-20% higher than this time last year. My personal experience is that this rate of change has been an annual occurance. The reason is not that the BEA survey does not include hospital charges. But obviously there is an important disconnect between the cost of health insurance and the costs reported by medical service delivery components. Here is some of the BEA's description of how they collect data for all of the measurement area's.

September 2010 Consumer Price Index

From the Bureau of Economic Activity today:
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in September on a
seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months,
the all items index increased 1.1 percent before seasonal adjustment.

Increases in food indexes and another rise in the gasoline index contributed to the all items seasonally
adjusted increase this month. Four of the six major grocery store food group indexes increased in
September as the food index posted its largest increase since October 2008. The gasoline index rose
again in September, leading to a third consecutive increase in the energy index despite a decline in the
index for household energy.

The index for all items less food and energy was unchanged in September, as it was in August. The
shelter index was unchanged for the second month in a row. The indexes for apparel, household
furnishing and operations, recreation, and used cars and trucks all declined in September, offsetting a
sharp increase in the index for medical care and a slight increase in the index for new vehicles.

Over the last 12 months, the index for all items less food and energy rose 0.8 percent, the lowest 12-
month increase since March 1961, with the shelter component down 0.4 percent. The food index rose
1.4 percent, with both the food at home index and food away from home index rising the same 1.4
percent. The energy index rose 3.8 percent over the last year, with gasoline up 5.1 percent.

July 2010 Consumer Price Index

A bump up in energy costs led to a rebound in CPI inflation, ending a three month string of declines. Meanwhile, the core rate remained soft. In June overall CPI inflation rebounded 0.3 percent, following a 0.1 percent decline in June. July's rise equaled analysts' forecast for a 0.3 percent increase. Excluding food and energy, the CPI eased to a 0.1 percent gain after a 0.2 percent boost in June. The consensus projection was for a 0.1 percent increase.

Within the core, a lot was going on. Probably the biggest item of note was the continuation of soft shelter costs which rose only 0.1 percent for the fourth month in a row. This reflects the weak housing market which has resulted in more unsold homes going to the rental market. Medical care cost fell back 0.1 percent after jumping 0.3 percent in June.

But some components showed some strength. Apparel jumped 0.6 percent. Tobacco spiked 1.6 percent. And new & used motor vehicles gained 0.3 percent.

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.

Data Source: Haver Analytics

June 2010 Consumer Price Index

On a seasonally adjusted basis, the CPI-U declined 0.1 percent in June after falling 0.2 percent in May. The index for all items less food and energy increased 0.2 percent in June after increasing 0.1 percent in May.

By components, energy component dropped 2.9 percent, equaling the May decrease. Gasoline fell 4.5 percent after a 5.2 percent decrease the previous month. Food prices overall were flat for the last two months.

Bumping up the core rate was a number of components. Apparel jumped 0.8 percent after a string of weak months. Medical care gained 0.3 percent. Used cars and tobacco both were up significantly for June.

Year-on-year, overall CPI inflation eased to 1.1 percent (seasonally adjusted) from 2.0 percent in May. The core rate in June remained at 1.0 percent. On an unadjusted year-ago basis, the headline number was up 1.1 percent in June while the core was up 0.9 percent.

May 2010 Consumer Price Index

The latest Consumer Price Index news release (http://www.bls.gov/news.release/pdf/cpi.pdf) was issued today by the Bureau of Labor Statistics. On a seasonally adjusted basis, the CPI-U declined 0.2 percent in May after falling 0.1 percent in April. The index for all items less food and energy increased 0.1 percent in May after being unchanged in April. Table 2 of the report shows that the seasonally adjusted and annualized rate of change for CPI-U over the past three months, through May 2010, is -0.7%, and for the past six months is 0.3%.

One Eye on the Fed: April CPI

Year-on-year, overall CPI inflation eased to 2.2 percent (seasonally adjusted) from 2.4 percent in March. The core rate slipped in April to 1.0 percent from 1.2 percent the prior month.

At the core level, apparel prices fell 0.7 percent and the huge shelter component was unchanged. Providing some upward pressure were gains in recreation, airline fares, and medical care.

Consumer prices inflation remains extremely low-giving the Fed plenty of leeway in its timing of unwinding its balance sheet expansion. Bond traders should like today's news and equity markets should be happy that the Fed is not under pressure to tighten sooner rather than later.

One Eye on the Fed: March CPI Index

The following release from Bloomberg, updates the condition of inflation in the US economy, using data collected and massaged by the Fed and its cohorts. It's the official public information and is useful because most people will use this data to base decisions around, right or wrong. In addition, I am adding in a few charts from the Federal Reserve displaying inflation in different contexts.

Fed inflation hawks got no help this morning as consumer price inflation was essentially nonexistent for March. Overall CPI inflation for March nudged up to 0.1 percent from no change the prior month. The March rise matched the consensus forecast for a 0.1 percent increase. Core CPI inflation, however, eased to no change from up 0.1 percent in March and coming in just under expectations for a 0.1 percent gain. At the headline level, food prices rose moderately while energy costs were flat. The core was held down in part by declines in apparel and recreation and flat housing costs.