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Consumer Price Index  
Released On 4/15/2009 8:30:00 AM For Mar, 2009
PriorConsensusConsensus RangeActual
CPI - M/M change0.4 %0.2 %-0.1 % to 0.3 %-0.1 %
CPI - Y/Y change0.1 %-0.4 %
CPI less food & energy- M/M change0.2 %0.2 %-0.1 % to 0.2 %0.2 %
CPI less food & energy - Y/Y change1.8 %1.8 %

Consumer price inflation in March slowed more than expected at the headline level. The headline CPI declined 0.1 percent in March, following a 0.4 percent gain the month before. The March CPI came in well below the consensus forecast for a 0.2 percent rise. Meanwhile, core CPI inflation remained steady at 0.2 percent, equaling the market expectation.

The deceleration in the headline CPI was led by a 3.0 percent dip in energy costs, following a 3.3 percent jump the month before. Gasoline fell 4.0 percent in the latest month. The food component also edged down 0.1 percent.

There were a number of cross currents in the core CPI. The indexes for lodging away from home, used cars and trucks, and airline fares continued to decline. Apparel prices fell in the latest month after no change in February. Recreation costs were flat in the latest month. Notably, the core rate would have been significantly weaker had there not been a monthly 11.0 surge in prices for tobacco & smoking products. Also adding upward pressure was a 0.6 percent rise in motor vehicles.

Year-on-year, headline inflation fell to down 0.4 percent (seasonally adjusted) in March from up 0.1 percent in February. Meanwhile, the core rate was steady at up 1.8 percent.

The latest CPI report show inflation subdued, leaving the Fed room to continue its quantitative easing. The news should be good for bonds but the Empire State manufacturing index came in stronger than expected which may override the CPI news.

Consensus Outlook
The consumer price index rose 0.4 percent in February, following a 0.3 percent boost the month before. Meanwhile, core CPI inflation came in at 0.2 percent, unchanged from January and matching the consensus. The headline number was boosted by higher oil prices as seen in the 3.3 percent jump in energy costs, including an 8.3 percent spike in gasoline prices. Food actually slipped 0.1 percent. Looking ahead, the headline number is likely to be on the high side as oil prices have been firming.

The Consumer Price Index is a measure of the change in 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 for the consumer. Annual inflation is also closely watched.

The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group, representing about 87 percent of the population. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.

The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.

The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.  Why Investors Care
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.
Data Source: Haver Analytics
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.
Data Source: Haver Analytics

2009 Release Schedule
Released On: 1/162/203/184/155/156/177/158/149/1610/1511/1812/16
Release For: DecJanFebMarAprMayJunJulAugSepOctNov

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