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 10/17/07 For Sep 2007 | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Highlights
Consumer price inflation in September rebounded overall on energy and food but the core rate has remained steady. Despite a steady core, the Fed still has to worry about inflation. The overall consumer price index in September rebounded 0.3 percent, following a 0.1 percent dip in August. The September gain just above the market forecast for a 0.2 percent boost in the overall CPI. For September, the core CPI inflation rate rose 0.2 percent, after rising 0.2 percent in each of the prior three months and matched expectations. Today's report does not show higher energy costs yet passing into the core. However, food price inflation has been creeping upward.
Year-on-year, the overall CPI jumped to up 2.8 percent in September from 1.9 percent in August. The core rate came in at 2.1 percent in September, unchanged from August on a year-on-year basis.
Higher energy prices boosted the overall CPI in September but not as much as feared. Meanwhile, food prices were up sharply. In the non-expenditure category for energy, prices rebounded 0.3 percent, following a 3.2 percent drop in August. For September, motor fuel was up 0.4 percent; fuel up was up 1.0 percent; and piped gas & electricity was up 0.1 percent. Food price inflation jumped in September with a 0.5 percent boost, following a 0.4 percent gain in August.
By expenditure category, a number of categories were on the high side. Leading the September increase were food & beverages, up 0.5 percent; "other," up 0.4 percent; housing, up 0.3 percent; apparel, up 0.3 percent; medical care, up 0.3 percent; and recreation, up 0.3 percent. On the soft side were transportation, up 0.1 percent, and education & communication, up 0.1 percent.
On an unrounded basis, the core CPI in September increased 0.21964 percent, compared to a modest gain of 0.15028 percent in August.
Today's report does not show higher energy costs yet passing into the core. However, food price inflation has been creeping upward. Today's report actually gives the Fed a lot to think about. Headline inflation is slowly rising but housing starts were in depression today also. The Fed is between a rock and a hard place in making the next interest rate decision on October 31. The question is whether a slowing economy is more of an issue than inflation. The balance may be tipping toward concern over weak housing, remaining credit crunch issues, and the impact on the consumer.
The consumer price index in August fell 0.1 percent, following a 0.1 percent up tick in July. A sharp 3.2 percent drop in the energy component was responsible for pulling down the overall CPI in the latest month. For August, the core CPI inflation rate posted a 0.2 percent increase, after rising 0.2 percent in each of the prior two months. In the latest FOMC minutes, the Fed acknowledged that core inflation has been relatively well behaved in recent months but still maintained that upside risks remain on inflation staying too high. Markets are expecting higher oil prices to boost overall consumer prices so a tame core number is really needed for the Fed to feel good about handing out a treat - another rate cut - Halloween afternoon.
CPI Consensus Forecast for September 07: +0.2 percent
Range: +0.1 to +0.4 percent
CPI ex food & energy Consensus Forecast for September 07: +0.2 percent
Range: +0.1 to +0.2 percent
![[Chart]](chart.gif)
|
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. |
![[Chart]](chart_1.gif)
|
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 | ||||||||||||||||||||||||||
|
powered by
![[Econoday]](../../../../../../../../../images/logo.gif){kind=logo}