Econoday Economic Report: Consumer Price Index June 15, 2011

2011 Economic Calendar

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Consumer Price Index

Released On 6/15/2011 8:30:00 AM For May, 2011

	Prior	Consensus	Consensus Range	Actual
CPI - M/M change	0.4 %	0.0 %	0.0 % to 0.3 %	0.2 %
CPI - Y/Y change	3.1 %			3.4 %
CPI less food & energy	0.2 %	0.2 %	0.1 % to 0.2 %	0.3 %
CPI less food & energy - Y/Y change	1.3 %			1.5 %

Highlights
Consumer price inflation softened in May on a decline in energy costs. The consumer price index in May grew at a 0.2 percent rate, down from 0.4 percent in April. The latest figure, however, came in higher than the consensus forecast for no change. Excluding food and energy, the CPI jumped 0.3 percent, following a 0.2 percent rise the month before. Analysts had forecast a 0.2 percent increase.

Turning to major components, energy came down 1.0 percent, following a string of strong gains including 2.2 percent in April. Gasoline declined 2.0 percent after jumping 3.3 percent in April. Food prices rose 0.4 percent, matching the boost in April.

Within the core, indexes for apparel, shelter, new vehicles, and recreation all contributed to the acceleration, rising more in May than in April. These increases more than offset declines in the indexes for airline fare, tobacco, and personal care. New & used vehicles rose a strong 1.0 percent but this may be a temporary effect of supply disruptions of parts from Japan and less availability of some auto models.

Year-on-year, overall CPI inflation worsened to 3.4 percent (seasonally adjusted) from 3.1 percent in April. The core rate bumped up to 1.5 percent from 1.3 percent in April on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.6 percent in May while the core was up 1.5 percent.

Today's inflation report lowers the odds of the Fed engaging in QE3 as there clearly are some warm spots within the CPI. With energy softening a bit, food price inflation is standing out more.

Market Consensus before announcement
The consumer price index in April increased 0.4 percent, following a 0.5 percent hike in March. Excluding food and energy, the CPI gained 0.2 percent, up from a 0.1 percent rise in March.
By major components, energy continued its upward surge, printing a 2.2 percent boost after jumping 3.5 percent in March. Gasoline jumped 3.3 percent, following a 5.6 percent surge in March. Food prices increased 0.4 percent in April, following a 0.8 percent gain the prior month.

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

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

2011 Release Schedule

Released On: 1/14 2/17 3/17 4/15 5/13 6/15 7/15 8/18 9/15 10/19 11/16 12/16

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