Monthly CPI Surge of 0.64% Masked by Seasonal Factor Revisions

January Annual CPI Inflation at 4.28% (11.8% SGS-Alternate)

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 PLEASE NOTE: The SGS-Alternate CPI will be updated through January 2008 reporting later today on the Alternate Data Series tab at www.shadowtats.com.
– Best wishes to all, John Williams

 Revisions Show Stronger Inflation

Annual revisions resulted in the reporting of a pattern of stronger monthly CPI inflation in the second half of 2007, which also had the effect of reducing January’s reported monthly inflation. Of further significance, particularly as to downside risk for the GDP benchmark revisions in July, the Chained-CPI-U annual growth was revised upwards sharply in 2007.

Except for outright errors, the not-seasonally-adjusted CPI never is revised. The adjusted numbers, however, are changed each year, and the latest revisions lowered the previously reported monthly inflation rates for January through May 2007 and upped reported monthly inflation for June through December 2007 (October’s monthly rate was not changed). One effect of the changed seasonal factors is that the Bureau of Labor Statistics (BLS) reported the adjusted January CPI-U up by 0.40% (0.50% unadjusted) +/- 0.12%, but the adjusted monthly growth rate for January was up by 0.64% net of the revisions. December now is up by 0.36% (previously 0.30%) for the month. January’s annual CPI inflation rate firmed to 4.28% from December’s 4.08% (unadjusted annual growth was not affected by the revisions).

Year-to-year annual inflation likely will continue its upturn in February 2008 reporting, dependent on the seasonally-adjusted monthly gain exceeding the 0.30% monthly increase now seen in February 2007. The difference will directly add to or subtract from January’s annual inflation rate of 4.28%.

As reported, the January CPI continues to show monthly and annual growth in retail under water, net of inflation. January real (net of inflation) average weekly earnings also were reported today as down 0.5% for the month, down 1.4% year-to-year. Both of these results tend to confirm a deepening inflationary recession. 

Annual inflation for the Chain Weighted CPI-U (C-CPI-U), the substitution-based series that increasingly gets touted by the manipulators and inflation apologists as the replacement for the CPI-U, was 3.91% in January up from a revised 3.69% (previously 3.41%) in December. The C-CPI generally moves in tandem with the personal consumption expenditure (PCE) deflator of the GDP. Any upwards revision to GDP inflation would result in an offsetting downwards revision to real GDP growth.

Adjusted to pre-Clinton (1990) methodology, annual CPI growth was about 7.6% in January, up from 7.4% in December. The SGS-Alternate Consumer Inflation Measure, which reverses gimmicked changes to official CPI reporting methodologies back to 1980, was roughly 11.8% in January, up from 11.7% in December.

Housing Starts Bottom Bounce. The reported 0.8% (0.6% net of revisions) +/- 9.6% seasonally-adjusted gain in January housing starts was statistically indistinguishable from a contraction and was little more than bottom bouncing. Year-to-year change was down by 27.9%.

Further details on current economic reporting follow in the February newsletter.