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Brent Meyer |

Economist

Brent Meyer

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

09.28.09

Economic Trends

August Price Statistics

Brent Meyer

The CPI jumped up 5.5 percent (annualized rate) in August, almost entirely on a spike in gasoline prices (the BLS says roughly 80 percent of the increase in the overall index was due to the increase in gas prices). Still, the 12-month growth rate in the series is down 1.5 percent. The core CPI (excluding food and energy prices) rose 0.8 percent in August, pushing its 12-month trend down 0.1 percentage point to 1.4 percent.

There were a couple rather curious price moves during the month. First, the price for new vehicles fell 14.7 percent in August, its largest monthly price decrease since the early 1970s. This is in part due to how the BLS calculated the effect of the CARS rebate on the price of new vehicles. Also, used car and truck prices jumped up 25 percent in August (their largest increase since 2004). A seasonal adjustment usually tamps down August used car prices, and this month was not an exception, though without seasonal adjustment used cars prices jumped up an outsized 33 percent. The increase could be attributed to the fact that the CARS rebate motivated consumers to head to the dealership and those that didn't qualify for the rebate ended up getting a “cherry of a deal” on a used car, but it could simply be a measurement error as well (perhaps because the sample may have been skewed). Elsewhere, OER (owners’ equivalent rent), which comprises roughly 25 percent of the overall CPI market basket, rose 1.0 percent in August after a virtually flat reading in July.

August 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
5.5
4.9
2.3
−1.5
2.6
0.3
 Less food and energy
0.8
1.4
1.9
1.4
2.2
1.8
 Medianb
1.8
0.9
1.2
1.8
2.6
2.9
 16% trimmed meanb
1.3
1.2
1.0
1.1
2.5
2.7
Producer Price Index
 Finished goods
23.1
11.0
4.3
−4.3
3.3
0.2
 Less food and energy
2.1
2.4
1.4
2.3
2.4
4.3

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

The measures of underlying inflation trends produced by the Federal Reserve Bank of Cleveland—the median CPI and the 16 percent trimmed-mean CPI—rebounded a little from July’s relatively low readings (both increased 0.2 percent). The median CPI rose 1.8 percent in August, while the 16 percent trimmed-mean CPI was up 1.3 percent. Over the last 12 months, they are up 1.8 percent and 1.1 percent, respectively.

The underlying price change distribution showed less softness in August, as roughly 30 percent of the index (by expenditure weight) exhibited outright price decreases, compared to nearly one-half of the index in July. Still, just 26 percent of the consumer market basket rose at rates exceeding 3.0 percent in August, compared to an average of 35 percent so far this year.

Both one-year ahead and longer-term (5 to10 years ahead) average inflation expectations from the University of Michigan’s Survey of Consumers ticked up in early September. One-year-ahead expectations rose 0.1 percentage point to 3.1 percent, while longer-term expectations increased from 3.1 percent in August to 3.3 percent. While short-term expectations have bounced around over the past year (likely following food and energy prices), it is not clear that longer-term expectations have shifted in any meaningful way recently, as the series has remained close to its five-year average of 3.4 percent.