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July Price Statistics

The Consumer Price Index (CPI) continued to show signs of moderation in July, increasing only 1.4 percent (annualized rate) after rising 4.9 percent over the past six months and 4.0 percent over the past three. The core CPI (excluding food and energy) rose 2.9 percent in July, surpassing its recent trend. Many energy-component prices fell in July, as the aggregated energy index decreased 11.5 percent. Some food prices decreased as well, such as meat, poultry, egg, and fish prices, which fell 4.7 percent in July.

While traditionally the CPI's most volatile components, transitory disturbances to the aggregate price data are not always confined to food and energy items. Men's and boy's apparel, footwear, and medical care prices all posted uncharacteristic increases this month. For example, men's and boy's apparel posted its largest annualized monthly increase since August 1991, jumping 17.6 percent during the month.

An alternative to the traditional measure of core inflation are trimmed-mean inflation statistics, which help us identify the underlying inflation trend regardless of the offending source of the transitory disturbance. (To read more on this subject click here, or for more on the median CPI and to see the disaggregated component price changes click here.) Two such measures, the median CPI and the 16 percent trimmed mean CPI, increased 2.0 percent and 1.8 percent, respectively, in July, both moderating from long-term trends.

July Price Statistics

Percent change, last
1mo.a 3mo.a 6mo.a 12mo. 5yr.a 2006 avg.
Consumer prices
All items 1.4 4.0 4.9 2.4 3.0 2.6
Less food and energy 2.9 2.5 2.2 2.2 2.1 2.6
Medianb 2.0 1.8 2.4 2.9 2.6 3.6
16% trimmed meanb 1.8 2.1 2.6 2.5 2.3 2.7
Producer prices
Finished goods 7.5 5.2 8.9 3.9 3.9 1.6
Less food and energy 1.5 2.5 2.1 2.4 1.5 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.

A broad deceleration in prices can also be inferred by the component-price-change distribution. Almost two-thirds of the CPI's components increased at rates exceeding 3 percent over the past 12 months, compared to 37 percent in July. Also, nearly one-third of the index decreased in July, as opposed to only 23 percent over the past 12 months.

CPI Component Price Change Distributions

Long-run inflation trends have also inched lower recently. The 12-month trend in the core CPI and the 16 percent trimmed-mean CPI have been decreasing since February and now range between 2.2 percent and 2.4 percent. The 12-month trend in the median CPI has fallen under 3 percent for the first time since May 2006 and now stands at 2.9 percent.

CPI, core CPI, and Trimmed-Mean CPI Measures

Inflation expectations, as measured by the University of Michigan's Survey of Consumers, have come down some over the past three months. In August, households' inflation expectation for the coming year was 4.0 percent - still somewhat elevated, but down from their expectation of the previous few months. Longer-term household inflation expectations have also moved just a bit lower recently, falling from 3.6 percent in July to 3.4 percent in August.

Household Inflation Expectations

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