The Consumer Price Index is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. Why Investors Care
| Released on 4/17/07 For Mar 2007 | |||||||||||||||||||||||||
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Highlights
Consumer prices were divergent in March with the overall rate rising while the core rate slowed. The consumer price index in March jumped to a 0.6 percent increase, following a 0.4 percent rise in February. March's figure equaled the consensus forecast for a 0.6 percent boost in the overall CPI. The core CPI eased to a 0.1 percent increase in March, following a 0.2 percent rise in February. The market forecast called for a 0.2 percent increase in the core rate for March. The core rate slowed mostly on a drop in apparel prices and a slowing in medical care inflation.
Year-on-year, the overall CPI stood at up 2.8 percent in March, rising from up 2.4 percent in February. The core rate edged down to up 2.5 percent on a year-on-year basis, compared to up 2.7 percent the month before.
Energy prices pushed up the overall CPI as expected while food price inflation moderated. In the non-expenditure category for energy, prices surged 5.9 percent, following a 0.9 percent increase in February. Piped gas and electricity rose 1.3 percent while fuel oil jumped 3.5 percent and gasoline prices spiked 10.6 percent. Energy costs are up 4.4 percent on a year-on-year basis, compared to down 1.0 percent in February. Food and beverages price inflation slowed to a 0.3 percent increase in March, following a 0.8 percent spike in February.
The core CPI continued to ease with a 0.1 percent rise in March, following a 0.2 percent gain the month before. Primarily pulling the core down were a 1.0 percent drop in apparel prices and a slower 0.1 percent increase in medical care inflation. Housing was moderate with a 0.2 percent rise. The owners' equivalent rent subcomponent was stuck at 0.3 percent - equaling its February increase.
Today's CPI report is largely favorable although concern remains over pass through of food and energy inflation to inflation expectations. Much of the improvement in core inflation reflects a moderation in components that had been strong recently. This points to the Fed's concern that underlying inflation takes time to set a new trend. The core data for March clearly are good overall for now. Still, we need to see improvement in food and energy. Nonetheless, the markets should see today's numbers as favorable.
The consumer price index the consumer price index in February firmed to a 0.4 percent increase, following a 0.2 percent increase in January. Meanwhile, the core CPI slowed to a 0.2 percent increase in February, following a 0.3 percent rise in January. Last week saw a favorable core PPI number for March and markets will be watching to see if this carries over to the CPI. Of course, the CPI has services not found in the PPI - notably for housing and medical care and these may keep the core CPI still on the high side. Additionally, higher food and energy prices are starting to cause concern that these will feed into core inflation.
CPI Consensus Forecast for March 07: +0.6 percent
Range: +0.4 to +0.7 percent
CPI ex food & energy Consensus Forecast for March 07: +0.2 percent
Range: +0.1 to +0.3 percent
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It is always a good idea to look at more than a few months of data to get a sense of changes in established trends. Monthly changes in the CPI are mainly volatile because of sharp fluctuations in food and energy prices. The core CPI eliminates the sharper fluctuations. |
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Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core CPI does not fluctuate as much as the total CPI. |
| 2007 Release Schedule | ||||||||||||||||||||||||||
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