Introduction
Earlier this morning, the Labor Department reported that consumer prices during July fell 0.1%. Excluding food and energy, the Consumer Price Index was up 0.1% during the month. Reports like these provide ample evidence of why the average person distrusts government economic data! And on this front, we have an educational treat on the horizon for clients.
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Foreword
Friend and client, John Williams, has done some great work over the years analyzing the "frailties" of key government economic data. I spoke with John recently, and he has agreed to share some of his highly enlightening work with my clients. The first installment will appear soon.
John's material will dovetail nicely with an observation I've made on more than one occasion, to wit:
"...Inflation data coming out of the Labor Department have reflected the fruits of a major effort during the 1990s to understate the numbers!"
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Today's Numbers
Per today's report from the Labor Department, the CPI fell 0.1% during July. Contributing materially to the result were a 1.9% decline in energy prices and 0.8% dips in apparel prices and transportation costs. Food prices rose 0.3% during the month; housing costs were up a tepid 0.2%.
The CPI's 0.1% decline was significantly better than a consensus forecast that was looking for a rise of 0.2%.
Year over year as of July, the CPI (all items) rose 3.0%, versus 3.2% in June. Excluding food and energy (the so-called "core" rate), July's year-over-year gain was 1.8%, the same as in June.
The Consumer Price Index, Producer Price Index and import prices are three of the four measures we employ in our "Inflation Watch" chart appearing on the GRA website. We will be updating this graph shortly to reflect the latest numbers, now that the July data have been reported for all three.
The updated numbers have been posted to the "Inflation" category on the GRA website, accessed through the "Data & Charts" link on the navigation bar.
Consumer Producer Import
Price Index Price Index Prices
Month/ ---------------------------------------
Year Y/Y L3Mos* Y/Y L3Mos* Y/Y L3Mos*
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07/04 3.0% 3.7% 4.0% 2.5% 5.5% 6.5%
06/04 3.2% 4.8% 4.0% 4.7% 5.6% 5.7%
05/04 3.0% 5.5% 4.9% 8.5% 6.8% 10.0%
04/04 2.3% 3.9% 3.6% 5.3% 4.6% 5.8%
03/04 1.7% 5.1% 1.4% 5.1% 1.1% 11.5%
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*Trailing 3-month compound
annual rate of change.
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