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Brent Meyer |

Economist

Brent Meyer

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

03.11.08

Economic Trends

January Price Statistics

Michael F. Bryan and Brent Meyer

The Consumer Price Index (CPI) rose at an annualized rate of 4.8 percent in January, following a 4.4 percent increase in December, outpacing its 6-month, 12-month, and 5-year trends. The usual suspects (energy and food) contributed to the increase in the headline number, rising at annualized rates above 8 percent, but were not the only culprits, as the CPI excluding food and energy (core CPI) advanced 3.8 percent during the month. There is evidence of broad-based price pressure, as the core CPI, the 16 percent trimmed-mean CPI, and the median CPI outpaced all of their respective longer-term trends. In fact, the core CPI saw its largest monthly jump since March 2004, and the last time the 16 percent trimmed mean was above 4.0 percent was September 2005. Import prices have been elevated lately, rising almost 20 percent (annualized rate) over the past three months, and we may be seeing some pass-through onto retail prices.

January Price Statistics

    Percent change, last
    1mo.a 3mo.a 6mo.a 12mo. 5yr.a 2007 avg.
Consumer Price Index
  All items
4.8
6.8
4.7
4.3
3.0
4.2
  Less food and energy
3.8
3.1
2.7
2.5
2.1
2.4
  Medianb
4.2
3.7
3.4
3.2
2.6
3.1
  16% trimmed meanb
4.3
3.5
3.1
3.0
2.4
2.8
Import Price Index
  All commodities
22.9
19.8
13.3
13.7
5.9
11.3
  Nonpetroleum imports
8.0
6.5
4.2
3.6
2.5
2.9
Export Price Index
  All commodities
15.0
10.6
7.9
6.7
4.1
6.0

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.

The 12-month growth rate in the CPI shot up to 4.4 percent in January from a recent low in August 2007 of 1.9 percent. The core CPI and trimmed-mean measures have exhibited a similar upward trend (to a lesser extent), and are now ranging between 2.5 percent and 3.2 percent.

An investigation into the monthly component price change distribution shows that the acceleration in prices is broad-based. Some relatively large components such as medical services, education, and lodging away from home increased more than 5.0 percent in January. In fact, over 53 percent of the index’s components grew at rates exceeding 4.0 percent, compared to an average of 3.4 percent in 2007. In contrast, only 23 percent of the CPI’s components increased less than 2.0 percent in January, whereas the average for 2007 was 38.4 percent.


Core services prices increased 4.6 percent in January, their largest monthly increase since October 2005, and pushed the 12-month growth rate to 3.4 percent. Core goods prices rose 1.9 percent during the month, after remaining virtually unchanged in December. The 12-month growth rate in core goods prices ticked up to 0.2 percent.


Looking forward, household inflation expectations for the year ahead ticked down slightly from January’s reading of 4.0 percent to 3.9 percent, according to the latest Survey of Consumers (University of Michigan). Expectations over the longer term (5-10 years) remained unchanged at 3.4 percent. Since 1995, both the year-ahead and the 5-10 year-ahead inflation expectations figures have averaged 3.5 percent.