Summary
The Consumer Price Index (all items) spiked in January, but year-over-year results remained highly unrealistic with regard to most consumers' real-world experience. Still, the major inflation story remains Wall Street's strong emphasis on price performance that excludes food and energy costs!
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General Observations
There are three government inflation or inflation-related series GRA monitors 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 affecting the US economy.
Nevertheless, keeping track of these series remains important. These are the numbers most visible to the public, and they also are the numbers hyped incessantly on "Tout TV" and the other venues in the regular propaganda loop. They also have been among the numbers frequently cited by various Federal Reserve officials as the basis for Fed monetary policy.
Even including the understatement inherent in the PPI and CPI, they still have shown an uncomfortable acceleration in recent years. For instance, the PPI was up 5.6% in 2005, versus 2004's reported 12-month change of 4.3%. As for the CPI, it rose a reported 3.4% in 2005, versus a 3.3% increase during 2004. However, based on reported data, the CPI was up a mere 1.9% in 2003. Therefore, 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 respective graphs on the "JWSGS" website's home page or the GRA website's home page.)
And On and On Goes the "Core" Rate Flim-Flam
How can anyone take very seriously these numbers or the importance of 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, Federal Reserve officials constantly cite various inflation measures that remove food and energy costs. Greenspan had turned this foolishness into a genuine art form! 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 have been 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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01/06 5.7% 2.0% 4.0% -0.2% 8.8% -2.4%
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12/05 5.6% 4.1% 3.4% -1.8% 8.0% -7.1%
11/05 4.5% 7.4% 3.5% 3.3% 6.5% 1.1%
10/05 5.8% 11.3% 4.4% 8.5% 8.2% 15.3%
09/05 6.6% 11.3% 4.7% 10.1% 9.9% 20.5%
08/05 5.2% 5.6% 3.6% 4.6% 8.2% 16.5%
07/05 4.7% 2.6% 3.1% 2.1% 8.2% 6.4%
06/05 3.8% 1.6% 2.5% 1.5% 7.4% 5.3%
05/05 3.7% 4.5% 2.9% 4.0% 5.9% 9.4%
04/05 4.7% 7.3% 3.5% 5.8% 8.4% 17.1%
03/05 5.0% 5.7% 3.2% 4.3% 7.6% 15.4%
02/05 4.7% 0.5% 3.0% 1.9% 6.1% 0.0%
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01/05 4.1% 2.4% 3.0% 1.3% 5.7% -4.5%
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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
---------------------------
2006 -- 1 Month
---------------
[1] 0.3% 0.4%
[2] 3.0% 4.6%
---------------------------
2005 5.6% 1.7%
2004 4.3% 2.3%
2003 3.9% 1.1%
2002 1.2% -0.6%
2001 -1.8% 1.0%
2000 3.9% 1.3%
1999 3.0% 0.8%
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Consumer Price Index
(All Urban,
All Items)
-- Y/Y Change
---------------------------
Excl. Food
Year All Items & Energy
---------------------------
2006 -- 1 Month
---------------
[1] 0.7% 0.2%
[2] 7.9% 2.4%
---------------------------
2005 3.4% 2.2%
2004 3.3% 2.2%
2003 1.9% 1.1%
2002 2.4% 2.0%
2001 1.6% 2.8%
2000 3.4% 2.6%
1999 2.7% 1.9%
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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
-----------------------------------------------------
01/06 1.3 -2.4 8.8 0.2 0.8 2.4 6.4 -14.1 48.3
=====================================================
12/05 -0.1 -7.1 8.0 0.1 3.9 2.5 -0.4 -40.8 42.5
11/05 -1.8 1.1 6.5 -0.1 7.3 2.8 -9.1 -21.5 26.7
10/05 0.1 15.3 8.2 1.0 8.1 3.8 -3.1 53.2 31.2
09/05 2.1 20.5 9.9 0.9 3.2 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
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01/05 0.6 -4.5 5.7 0.8 5.5 3.1 2.2 -47.4 24.2
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