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Brent Meyer |

Economist

Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.

05.20.09

Economic Trends

April Price Statistics

Brent Meyer

The Consumer Price Index (CPI) was virtually flat in April, falling 0.2 percent at an annualized rate, pulled down in part by falling food and energy prices, which were down 2.2 percent and 25.1 percent, respectively. Over the past 12 months, the CPI has fallen 0.7 percent, its sharpest decrease since June 1955. The growth rate in energy prices is down 25.2 percent over the past year—compared to jumping above 29 percent last July—which is driving much of the price declines in the overall CPI.

Excluding food and energy prices (core CPI), the index jumped up 3.1 percent. As was the case in March, the excise tax on tobacco was the smoking gun pushing up the core CPI. Tobacco prices jumped up 191.7 percent (annualized rate) as the tax went into effect on April 1. Early adopters raised prices in March, which led to a 251 percent increase (annualized) that month.

April Price Statistics

  Percent change, last
  1 mo.a  3 mo.a  6 mo.a  12 mo.5 yr.a  2008 average
Consumer Price Index
 All items
−0.2
0.9
−3.9
−0.7
2.6
0.3
 Less food and energy
3.1
2.5
1.7
1.9
2.2
1.8
 Medianb
2.1
2.1
2.1
2.6
2.8
2.9
 16% trimmed meanb
0.9
1.3
1.1
2.1
2.6
2.7
Producer Price Index
 Finished goods
3.6
−3.0
−8.6
−3.5
2.9
0.2
 Less food and energy
0.7
1.2
1.7
3.4
2.5
4.3

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

Alternative core measures of underlying inflation—the median CPI and the 16 percent trimmed-mean CPI—were somewhat disparate in April. The median CPI rose 2.1 percent in April and is up 2.6 percent over the past 12 months, while the 16 percent trim rose just 0.9 percent during the month and is up 2.1 percent over the past year.

The price-change distribution revealed that roughly 29 percent of the consumer market basket (by expenditure weight) exhibited price decreases this month, compared to 32 percent in March. At the same time, 17 percent of the index was in the upper tail (price increases above 5.0 percent), compared to 12 percent in March and an average of 24 percent in 2008. Even though it looks like the lower tail of the price-change distribution has grown in recent months, the share of the consumer market basket exhibiting price increases ranging between 0 percent and 3 percent was 33 percent in April, up 1.0 percentage point from the 2008 average.

Both short-term and longer-term consumer inflation expectations ticked down slightly in May. One-year-ahead average expectations ticked down from 3.1 percent in April to 2.9 percent in May. Longer-term (5–10 years ahead) average inflation expectations also fell to 2.9 percent in May, though they are still above their recent low of 2.6 percent in December 2008.