06.07.07

Economic Trends

April Price Statistics

Michael F. Bryan and Linsey Molloy

While the April price report was a bit more favorable, retail price data on balance continues to suggest that the inflation trend is a bit north of 2 percent. The Consumer Price Index remained elevated in April, rising at a 5.1 percent annualized rate. The CPI excluding food and energy rose a more modest 2.1 percent, a bit above its 3- and 6-month trends but below its 12-month trend of 2.3 percent. The alternative core measures revealed that monthly growth in retail prices decelerated from longer-term trends. The median CPI, which had risen 3 percent or more in five of the past six months, rose a more moderate 2.1 percent, while the 16 percent trimmed-mean rose 2.5 percent.

April Price Statistics

    Percent change, last:
    1 mo.a 3 mo.a 6 mo.a 12 mo. 5 yr.a 2006 avg.
Consumer Price Index            
  All items 5.1 5.7 4.2 2.6 2.8 2.6
  Less food and energy 2.1 1.9 2.0 2.3 2.0 2.6
  Medianb 2.1 3.0 3.0 3.4 2.6 3.6
  16% trimmed meanb 2.5 3.1 2.8 2.8 2.3 2.7
Producer Price Index            
  Finished goods 9.1 12.8 10.0 3.2 3.6 1.6
  Less food and energy 0.0 1.5 3.2 1.5 1.4 2.1

a. Annualized.
b. Calculated by the Federal Reserve Bank of Cleveland.
Sources: U.S. Department of Labor, Bureau of Labor Statistics; and Federal Reserve Bank of Cleveland.

Longer-term trends in the retail price measures generally indicate that the inflation rate lies between 2¼ and 2¾ percent. The CPI component monthly price-change distribution reveals that in fact, almost one-third of the index is rising at rates similar to the overall inflation trend, while an additional one-third of the index rose at rates exceeding three percent. This is an improvement from the average monthly inflation rates over the past 12 months, when nearly two-thirds of the index’s components rose at rates exceeding 3 percent.

Meanwhile, year-ahead inflation expectations continue to rise, reaching their highest level since last summer, revealing that households expect a 4.3 percent rise in retail prices over the next year. Longer-term inflation expectations among households, which are correlated with movements in core inflation, reached 3.7 percent, a bit above the 3 percent–3½ percent range in which they’ve generally fluctuated for nearly decade.