Wednesday, June 15, 2005

INFLATION, SHMINFLATION PART 2

Yesterady we had the May producer price index report showing us inflation in America is nothing to worry about. Today we have the May consumer price index telling us the same thing.
The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in May, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The May level of 194.4 (1982-84=100) was 2.8 percent higher than in May 2004. . . .

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) was unchanged in May on a not seasonally adjusted basis. The May level of 113.1 (December 1999=100) was 2.5 percent higher than in May 2004.
A consumer inflation level of 2.8% is quite low in the grand scheme of things and is now at its lowest point since September 2004. Energy prices have obviously been through the roof, with the compound annual rate for the last three months standing at 28.7%. That being said, the core CPI is a mere 2.2% and has been more or less steady for the last seven months.

Not only have we been getting mild inflation reports from the producer and consumer levels, we're also getting them on the import front as well. In May the US import price index fell markedly, -1.3%. Much of this was thanks to falling petroleum import prices, but non-petroleum import prices were also down, -0.3% in May which was the first monthly decline since October 2004. Annual non-petroleum import price inflation is just 2.5% and annual non-fuel import price inflation is a mere 2.0%. Non-petroleum import inflation is at its lowest level since July 2004, and non-fuels import inflation is at its lowest point since February 2004.

So the message seems to be: bring on the stuff!

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