Tuesday, July 17, 2012

It's The Economy Stupid: CPI

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.

 

 

No comments:

Post a Comment