| Consumer Price Index |
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Released On 7/15/2011 8:30:00 AM For Jun, 2011
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Prior | Consensus | Consensus Range | Actual |
| CPI - M/M change | 0.2 % | -0.2 % | -0.3 % to 0.0 % | -0.2 % | | CPI - Y/Y change | 3.4 % | | | 3.4 % | | CPI less food & energy | 0.3 % | 0.2 % | 0.1 % to 0.2 % | 0.3 % | | CPI less food & energy - Y/Y change | 1.5 % | | | 1.6 % |
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Highlights
Consumer price inflation turned negative for the first time in twelve months on another decline in energy costs. The consumer price index in June dipped 0.2 percent, following a 0.2 percent increase the month before. The June number matched the median estimate for a 0.2 percent decrease. Excluding food and energy, the CPI rose 0.3 percent, equaling the May rate and topping the consensus forecast for a 0.2 percent increase.
Turning to major components, energy dropped 4.4 percent, following a 1.0 percent decline. Gasoline fell 6.8 percent after decreasing 2.0 percent in May. Food price inflation slowed with a 0.2 percent gain after a 0.4 percent surge the month before.
Within the core new vehicles increased 0.6 percent, used cars and trucks jumped 1.6 percent, and apparel increased 1.4 percent in June. And owners' equivalent rent is no longer as soft as in recent months, rising 0.2 percent.
Year-on-year, overall CPI inflation held steady at 3.4 percent (seasonally adjusted) in June. In contrast, the core rate firmed to 1.6 percent from 1.5 percent in May on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.6 percent in June while the core was up 1.6 percent.
The headline is good news but the strong core will give Fed officials pause on taking on more quantitative easing. However, the motor vehicle prices gains are likely temporarily hot.
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Market Consensus before announcement
The consumer price index grew at a slower pace in May on a decline in energy costs. The consumer price index in May advanced at a 0.2 percent rate, down from 0.4 percent in April. Energy came down 1.0 percent, following a string of strong gains including 2.2 percent in April. Food prices rose a strong 0.4 percent, matching the boost in April. Notably, excluding food and energy, the CPI jumped 0.3 percent, following a 0.2 percent rise the month before.
Within the core, indexes for apparel, shelter, new vehicles, and recreation all contributed to the acceleration, rising more in May than in April.
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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=21094)
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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=21095)
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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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