Inflation, shminflation part 4
Another tepid inflation report released today by the BLS.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in June, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The June level of 194.5 (1982-84=100) was 2.5 percent higher than in June 2004. . . .While the annual consumer inflation rate (SA) now stands at 2.5%, the annualized 3-month rate is a mere 1.9%. Core annual consumer inflation is just 2.0%, and the annualized 3-month rate is 1.2%. Core inflation has been trending downwards since its February peak of 2.4% and in June was back to the level of last fall. The 3-month core annualized rate hasn't been this low since December 2003 -- the deflation scare days.
On a seasonally adjusted basis, the CPI-U was unchanged in June, following a decrease of 0.1 percent in May.
This report continues to demonstrate the dramatic differences over the last three months in US inflation rates by sector: deflation or near-deflation (<2%) in most goods, mild inflation (2-5%) in most services including medical care, and relatively high inflation (>5%) in energy and a few high-end services like college education. Here are a few examples of annual inflation (NSA) in June 2005 at the ends of the spectrum:
Information technology, hardware and services: -8.7%If it wasn't for rocketing energy prices, we'd be talking about Ben Bernanke's deflation speech all over again. Remember that Bernanke delivered his speech in November 2002 when core CPI (NSA) stood at 2.0% and falling -- the same level and direction as June 2005.
Video and audio: -1.2%
Household furnishings and operations: +0.3%
New cars and trucks: +0.6%
Food at home: +1.4%
Financial services: +1.7%
. . .
Airline fares: +5.8%
Fuels and utilities: +7.2%
College tuition and fees: +8.1%
Energy commodities: +8.2%
In two inflation posts yesterday (here and here), Barry Ritholtz at The Big Picture argued
Any time you see a fund manager or eoconomist on CNBC discussing how benign inflation is, you can comfortably file that person away as clueless cheerleader.Barry is right to the extent that he points out the dramatic differences across sectors as well as the failure of real wages to keep up with important goods and services like fuel and education. That being said, overall we are looking at incredibly -- and I think potentially dangerously -- low inflation levels. And my track record shows I'm no cheerleader.