Friday, May 14, 2004

The CPI data out today shows that inflation is most definitely back in the US of A.
During the first four months of 2004, the CPI-U rose at a 4.4 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 1.9 percent for all of 2003. The index for energy, which increased 6.9 percent in 2003, increased at a 28.3 percent SAAR in the first four months of 2004. Petroleum-based energy costs increased at a 55.8 percent annual rate and charges for energy services rose at a 4.8 percent annual rate. The food index has increased at a 1.5 percent SAAR thus far this year, following a 3.6 percent rise for all of 2003. Excluding food and energy, the CPI-U advanced at a 3.0 percent SAAR in the first four months, following a 1.1 percent rise in all of 2003.
Of course, a picture tells a thousand words.
As you can see, annualized core inflation has taken off in the last two months after a long steady decline. I have a feeling, however, that this is more a temporary bump in the road. Overproduction is still the name of the game in the global economy. China is having great trouble cooling down its economy and the US consumer cannot live off toxic forms of income forever.

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