Headline CPI did not increase, and it didn’t decrease. Of course everything else about CPI changed. Fuel costs down, food costs up, yada, yada, yada. Inflation ain’t our problem. Growth (or lack thereof), that’s the problem.
Wire: BLOOMBERG News (BN) Date: Jul 17 2012 9:14:23
Consumer Price Index in U.S. Was Unchanged, Core Up 0.2% (2)
(Updates with Bernanke comments in eighth paragraph.)
By Shobhana Chandra
July 17 (Bloomberg) -- The cost of living in the U.S. was
little changed in June, a sign inflation may stay subdued as
Federal Reserve officials have predicted.
No change in the consumer-price index followed a 0.3
percent drop in May, a Labor Department report showed today in
Washington. The measure matched the median forecast of
economists in a Bloomberg News survey. The so-called core
measure that excludes volatile food and fuel costs rose 0.2
percent for a fourth month.
Companies from Supervalu Inc. to Chrysler Group LLC are
offering incentives to boost sales as weak job gains squeeze
households, underscoring limited pricing power among businesses.
With inflation less of a concern, Fed policy makers have room to
take additional steps to ensure the world’s largest economy
keeps expanding.
“Inflation is not a concern at this time,” said Ryan
Sweet, a senior economist at Moody’s Analytics Inc. in West
Chester, Pennsylvania, who was among economists projecting no
change in June consumer prices. “The central bank is more
worried about growth. Policy makers have signaled they may lean
toward more easing.”
The CPI was restrained by a third month of declines in
energy prices. Airfares fell, used car prices were unchanged and
the cost of shelter posted its smallest gain since September.
The forecast for consumer prices was based on the median of
81 economists in a Bloomberg survey. Economists’ estimates
ranged from a gain of 0.2 percent to a decline of 0.6 percent.
Stock Fall
Stocks fell after Fed Chairman Ben S. Bernanke’s testimony
to Congress disappointed investors anticipating a more
definitive signal the central bank was prepared to provide more
stimulus. The Standard & Poor’s 500 Index dropped 0.2 percent to
1,350.97 at 10:08 a.m. in New York.
“The U.S. economy has continued to recover, but economic
activity appears to have decelerated somewhat during the first
half of this year,” Bernanke said today in testimony for
delivery to the Senate Banking Committee in Washington. The Fed
is “prepared to take further action as appropriate to promote a
stronger economic recovery,” he said, while refraining to
discuss specific steps.
Overall consumer prices increased 1.7 percent in the 12
months ended in June, matching the year-over-year gain in May.
The core CPI climbed 2.2 percent from June 2011, in line
with the median forecast and following a 2.3 percent gain in the
12 months to May.
Cheaper Fuel
Energy costs decreased 1.4 percent from a month earlier,
reflecting drops in gasoline, fuel oil and electricity.
Households are getting some relief as lower fuel expenses
contain the cost of living. The price of a gallon of regular
gasoline at the pump averaged $3.49 in June, down 22 cents from
May, according to AAA, the nation’s largest motoring
organization. It has fallen further, reaching $3.40 on July 15.
Food costs climbed 0.2 percent, driven by gains in meats,
fruits and vegetables. A worst-in-a-generation drought from
Indiana to Arkansas to California is damaging crops and rural
economies and threatening to drive food prices to record levels.
Today’s report showed prices of new vehicles rose 0.2
percent for a second month, while the cost of used cars was
unchanged.
Auto Incentives
Automakers are offering incentives to attract customers.
Chrysler Group LLC, the company controlled by Fiat SpA, said it
will let buyers put off monthly payments for the first 90 days
in a national promotion for all of its vehicles through the end
of July. General Motors Co. will offer no-haggle pricing on 2012
Chevrolet vehicles plus a money-back guarantee on all new
Chevys, running through Sept. 4.
The cost of medical care services climbed 0.7 percent, the
biggest gain since 2010, today’s data showed.
Owners-equivalent rent, one of the categories designed to
track rental prices, climbed 0.1 percent for a second month. The
cost of all shelter also rose 0.1 percent.
Average hourly earnings adjusted for changes in prices rose
0.2 percent in June after a 0.5 percent increase the prior
month. They were up 0.3 percent over the past 12 months.
Businesses may hold the line on prices as slower payroll
gains and unemployment at 8.2 percent sap household spending,
which makes up 70 percent of the economy. Retail sales fell for
a third month in June, the longest stretch of declines since
2008, figures showed yesterday.
Grocery Stores
Supervalu, the third-largest U.S. grocery chain, plans to
accelerate price reductions. The Eden Prairie, Minnesota-based
company said dollar-store chains have grabbed more consumers.
“Consumers’ price sensitivity has intensified given the
continuing weak economic environment,” Craig Herkert, chief
executive officer, told analysts on a July 11 call. “This has
led many retailers to become even more aggressive on promotions
and price investment, and to step up their marketing activity.”
Several Fed officials said more action could be warranted
if growth slows, risks intensify or inflation seems likely to
fall “persistently” below their goal, according to minutes of
the June 19-20 meeting released last week. Central bank staff
“continued to project that inflation would be subdued through
2014,” the text showed.
The CPI is the broadest of three price gauges from the
Labor Department because it includes goods and services. About
60 percent of the index covers prices consumers pay for services
from medical visits to airline fares, movie tickets and rents.
Producer prices rose 0.1 percent in June, the first gain in
four months and a reflection of higher food expenses, while the
import-price index declined 2.7 percent in June, the biggest
plunge since December 2008, reports showed last week.
