Summary
The Labor Department has now reported December results for the three government inflation/inflation-related series we regularly monitor. Here is a summation.
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General Observations
There are three government inflation or inflation-related series I monitor regularly: the Producer Price Index, the Consumer Price Index and import prices. I believe and believe strongly that by their current design, the PPI and CPI in particular materially understate the actual inflation and inflationary pressures now affecting the US economy.
Nevertheless, keeping track of these series remains important. These are the numbers most visible to the public, and they are the numbers hyped incessantly on "Tout TV" and the other venues in the regular propaganda loop. They also have been among the numbers most frequently cited by Alan Greenspan as the basis for Federal Reserve monetary policy.
Even including the understatement inherent in the PPI and CPI, they still have shown an uncomfortable acceleration over the last several quarters. For instance, the PPI was up a reported 5.7% in 2005, versus 2004's reported 12-month change of 4.4%. As for the CPI, it rose 3.4% in 2005, the same as its rounded change during 2004. Thus, the above-average reported change for both series has persisted (or accelerated), over the last three years in the case of the PPI, and over the last two years in the case of the CPI. This is clearly shown in the tables below.
(See also the graph on the home page of the "JWSGS" website, and the graph on the home page of the GRA website.)
The "Core" Rate Flimflam
Of course, one of the giant games that continues to be played with these numbers is emphasizing their change when the "inconsequential" food and energy sectors are removed from the calculations. This constitutes the so-called "core" rate.
Over the years, I have been consistent in expressing the opinion that it is nothing short of moronic to make a big deal of life as a consumer that is void of price considerations relating to eating, heating, cooling, driving, etc., or life as a businessman in which energy costs in particular are taken so lightly. Nevertheless, this is done all the time by Wall Street, or at least all the time when the removal of food and energy costs results in more favorable inflation data.
In addition, Alan Greenspan and other Federal Reserve officials constantly cite various inflation measures that remove food and energy costs. Let's hope this is done mostly for propaganda purposes, and that these folks have more introspective moments in private.
Following are results for the PPI, CPI and import prices over various periods. (NOTE: The applicable portions of the data shown in the tables below will be posted to the "Data & Charts" section of the GRA website.)
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Producer, Consumer and Import Prices (Com-
posite Results & Annual PPI, CPI Results)
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Producer Consumer Import
Price Index Price Index Prices
Month/ ----------------------------------------
Year Y/Y L3Mos* Y/Y L3Mos* Y/Y L3Mos*
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12/05 5.7% 3.6% 3.4% -1.6% 7.9% -7.5%
11/05 4.5% 7.1% 3.5% 3.5% 6.5% 2.9%
10/05 5.9% 13.0% 4.3% 8.0% 8.2% 16.5%
09/05 6.7% 14.2% 4.7% 9.4% 9.9% 20.5%
08/05 5.2% 6.7% 3.6% 4.2% 8.2% 16.5%
07/05 4.6% 1.8% 3.1% 1.9% 8.2% 6.4%
06/05 3.6% 0.0% 2.5% 1.9% 7.4% 5.3%
05/05 3.6% 3.2% 2.8% 4.4% 5.9% 9.4%
04/05 4.7% 6.7% 3.5% 6.2% 8.4% 17.1%
03/05 5.0% 5.4% 3.2% 4.3% 7.6% 15.4%
02/05 4.7% 1.1% 2.9% 1.7% 6.1% 0.0%
01/05 4.2% 2.1% 2.9% 1.3% 5.7% -4.5%
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12/05 4.4% 7.7% 3.4% 3.4% 9.9% 15.3%
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*Trailing three-month com-
pound annual rate of change.
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Producer Price Index
(Finished Goods)
-- Y/Y Change
---------------------------
Excl. Food
Year All Items & Energy
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2005 5.7% 1.7%
2004 4.3% 2.2%
2003 4.0% 1.0%
2002 1.2% -0.6%
2001 -1.8% 1.0%
2000 4.1% 1.6%
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Consumer Price Index
(All Urban,
All Items)
-- Y/Y Change
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Excl. Food
Year All Items & Energy
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2005 3.4% 2.2%
2004 3.4% 2.2%
2003 1.9% 1.1%
2002 2.4% 2.0%
2001 1.5% 2.7%
2000 3.4% 2.6%
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Import Prices (Detail)
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U.S. IMPORT PRICES - % CHANGE
(3-Mo.= Three-month Compound Annual Rate)
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All Imports, Petroleum
All Imports Excl. Petrol. Imports Only
Month/ -------------- --------------- ---------------
Year Mo. 3-Mo. Y/Y Mo. 3-Mo. Y/Y Mo. 3-Mo. Y/Y
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12/05 -0.2 -7.5 7.9 0.0 3.5 2.4 -0.9 -40.8 42.9
11/05 -1.8 2.9 6.5 0.1 7.3 2.8 -9.2 -19.9 27.4
10/05 0.1 16.5 8.2 0.8 7.7 3.6 -2.5 56.6 31.9
09/05 2.1 20.5 9.9 0.9 3.6 2.7 6.9 133.7 50.4
08/05 1.4 16.5 8.2 0.1 -1.2 1.9 7.4 151.4 45.4
07/05 1.2 6.4 8.2 -0.2 -2.3 2.1 7.7 57.9 47.3
06/05 1.2 5.3 7.4 -0.2 0.0 2.3 8.9 35.3 39.9
05/05 -0.8 9.4 5.9 -0.2 2.0 2.6 -4.4 59.2 27.1
04/05 0.9 17.1 8.4 0.4 3.2 3.0 3.6 132.7 45.5
03/05 2.2 15.4 7.6 0.3 2.8 2.9 13.4 120.6 40.1
02/05 0.9 0.0 6.1 0.1 3.2 2.8 5.1 -17.9 29.8
01/05 0.6 -4.5 5.7 0.3 6.6 3.1 2.2 -47.4 24.2
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12/04 -1.4 -0.4 6.7 0.4 4.9 3.7 -11.4 -26.6 30.3
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