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September Price Statistics

The Consumer Price Index (CPI) was virtually unchanged in September, falling just 0.4 percent at an annualized rate. Energy prices continued to decrease sharply during the month, slipping 20.7 percent (annualized rate) after a 31.8 percent decrease in August. However, food prices continued to climb, rising 7.0 percent in September. Over the past 12 months, food prices have risen 6.2 percent - their highest growth rate since March 1990. Excluding food and energy, consumer prices rose just 1.7 percent in September, compared to 3.4 percent in the three months prior. The median CPI rose 2.9 percent, while the 16 percent trimmed-mean CPI increased just 1.4 percent. Over the past couple of months, the median CPI has remained stubbornly elevated (falling only slightly), while the 16 percent trimmed-mean CPI has fallen dramatically from July's 7.2 percent increase. This disparity between the median CPI and the 16 percent trimmed-mean has a lot to do with the majority of the index's components falling in the tails of the distribution.

SeptemberPrice Statistics

Percent change, last
1mo.a 3mo.a 6mo.a 12mo. 5yr.a 2007 avg.
Consumer Price Index
All items -0.4 2.6 5.2 4.9 3.4 4.2
Less food and energy 1.7 2.7 2.6 2.5 2.3 2.4
Medianb 2.9 3.7 3.5 3.3 2.8 3.1
16% trimmed meanb 1.4 3.3 3.6 3.4 2.7 2.8
Producer Price Index
Finished goods -4.5 -0.4 6.8 8.7 4.7 7.1
Less food and energy 5.7 5.4 4.9 4.1 2.3 2.1
a. Annualized.
b. Calculated by the Federal Reserve Bank of Cleveland.
Sources: U.S. Department of Labor and Bureau of Labor Statistics.

Looking at the distribution of price changes of the individual components of the CPI in September reveals that 29 percent of the components posted price increases between 1 and 4 percent, 26 percent posted decreases, and 23 percent posted increases exceeding 5.0 percent. Because such a large proportion of the overall index exhibited price declines, some were picked up by the 16 percent trimmed-mean CPI, pulling its September percent change down. The median CPI, on the other hand, is effectively a 99 percent trimmed-mean measure, and as such it completely disregards the tails of the distribution. This difference in the trims accounts for the disparity between the two measures' estimates of inflation. Nevertheless, by every measure of consumer prices we track, price pressures eased in September when compared to the past 3-, 6-, and 12-month periods.

CPI Component Price Change Distributions

Over the past 12 months, the CPI has increased 4.9 percent. The longer-term trends in the core and trimmed-mean measures remained somewhat elevated in September, ranging between 2.5 percent and 3.4 percent.

CPI, Core CPI, and Trimmed-Mean CPI Measures

Short-term (one-year ahead) average inflation expectations, measured by the University of Michigan's Survey of Consumers , remained at 4.6 percent in October, as energy and commodity prices continued to fall from recent highs. Long-term (5-10 year) average inflation expectations decreased from 3.3 percent in September to 2.9 percent in October, their lowest value since March 2003.

Household Inflation Expectations

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