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August Price Statistics

The Consumer Price Index (CPI) fell for the first time since October 2006, declining at an annualized rate of 1.6 percent in August. It was pulled down, as expected, by a large decrease (-31.8 percent) in energy prices, which, in the three months prior to August, had helped to push the CPI up 10.6 percent. The CPI excluding food and energy (core CPI) increased 2.4 percent during the month, compared to a 4.0 percent increase in July and a 3.9 percent increase in June. The median and 16 percent trimmed-mean CPI estimates also rose more slowly in August than in July. The median CPI rose 3.5 percent during the month, down from 4.7 percent in July. At the same time, the 16 percent trimmed-mean CPI increased just 1.2 percent, compared to a 7.2 percent increase last month.

August Price Statistics

Percent change, last
1mo.a 3mo.a 6mo.a 12mo. 5yr.a 2007 avg.
Consumer Price Index
All items -1.6 7.2 6.0 5.4 3.5 4.2
Less food and energy 2.4 3.4 2.6 2.5 2.3 2.4
Medianb 3.5 4.3 3.5 3.3 2.8 3.1
16% trimmed meanb 1.2 4.6 4.0 3.5 2.7 2.8
Producer Price Index
Finished goods -10.5 8.6 9.6 9.7 4.9 7.1
Less food and energy 2.9 4.6 4.3 3.7 2.2 2.1
a. Annualized.
b. Calculated by the Federal Reserve Bank of Cleveland.
Sources: U.S. Department of Labor and Bureau of Labor Statistics.

In August, 30 percent of the components of the CPI exhibited price decreases, while 22.5 percent experienced increases at rates exceeding 5.0 percent (so a majority of the index's components fell into the tails of the distribution). The prices of some fairly substantial components - gas and piped electricity, lodging away from home, new vehicles and used cars and trucks, and communication - which together account for 16 percent of household expenditures on CPI components, decreased in August. The combined weight of their decreases helped to pull down the 16 percent trimmed-mean. It also explains some of the disparity between the median and the 16 percent trimmed-mean measures.

CPI Component Price Change Distributions

Over the past 12 months, the CPI has increased 5.4 percent. The longer-term trends in the core and trimmed-mean measures remained somewhat elevated in August, ranging between 2.5 percent and 3.5 percent.

CPI, Core CPI, and Trimmed-Mean CPI Measures

Core services, which account for roughly 55 percent of the overall CPI, exhibited price gains in August (up 3.0 percent), roughly in line with the longer-term trend of 3.3 percent. Core goods prices returned to trend growth, increasing 0.8 percent in August after a hefty 5.6 percent gain last month.

Core CPI Goods and Core CPI Services

Short-term (one-year ahead) average inflation expectations fell to 3.9 percent in September (as measured by the University of Michigan'sSurvey of Consumers), as energy and commodity prices continued to fall from recent highs. Long-term (5-10 year) average inflation expectations decreased from 3.9 percent in August to 3.1 percent in September.

Household Inflation Expectations

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