| Consumer Price Index |
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Released On 4/15/2011 8:30:00 AM For Mar, 2011
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Prior | Consensus | Consensus Range | Actual |
| CPI - M/M change | 0.5 % | 0.5 % | 0.3 % to 0.5 % | 0.5 % | | CPI - Y/Y change | 2.2 % | | | 2.7 % | | CPI less food & energy | 0.2 % | 0.2 % | 0.1 % to 0.2 % | 0.1 % | | CPI less food & energy - Y/Y change | 1.1 % | | | 1.2 % |
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Highlights
Today's CPI report is a tale of two cities-headline is hot while the core is subdued. The consumer price index in March posted a 0.5 percent hike, matching the increase in February and meeting expectations. Excluding food and energy, the CPI eased to 0.1 percent, following a 0.2 percent rise and coming in below analysts' forecast for 0.2 percent.
By major components, energy jumped 3.5 percent after surging 3.4 percent in February. Gasoline increased 5.6 percent, following a 4.7 percent hike in February. Food price inflation worsened to a 0.8 percent gain, following a 0.6 percent boost in February.
The core was softened by a 0.5 percent decline in apparel prices, a 0.1 percent dip in household furnishings, a flat recreation component, and shelter rising only 0.1 percent. On the upside, notable gains were seen in new & used vehicles, up 0.8 percent, and public transportation, up 1.3 percent largely on airline fares.
Year-on-year, overall CPI inflation worsened to 2.7 (seasonally adjusted) from 2.2 percent in February. The core rate rose to 1.2 percent from 1.1 percent on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 2.7 percent in March while the core was up 1.2 percent.
Today's report provides a policy quandary for the Fed or at least a public relations bump in the road if some FOMC participants want to keep arguing that all that matters is the core. If that is the case, perhaps consumers should go out and rebuild their wardrobe instead of eating and driving. The bottom line is that this report raises the debate about what counts in making monetary policy.
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Market Consensus before announcement
The consumer price index in February jumped 0.5 percent, following a 0.4 percent boost in January. Excluding food and energy, CPI inflation increased 0.2 percent, matching the rise in the prior month. Although the overall CPI was led upward by energy, food also played a major role. Energy surged 3.4 percent in February after increasing 2.1 percent in January. Food price inflation remained strong with a 0.6 percent increase, following a 0.5 percent gain in January. The core was led up by new vehicles, medical care, and airline fares. On the soft side was shelter which edged up marginally. The apparel index was one of the few to decline.
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Definition
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. That is the index shows the change in price levels since the index base period, currently 1982-84 = 100. Monthly changes in the CPI represent the rate of inflation.
Why Investors Care
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![[Chart]](showimage.asp?imageid=20680)
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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
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![[Chart]](showimage.asp?imageid=20681)
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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
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