Econoday Economic Report: Consumer Price Index September 14, 2012

2012 Economic Calendar

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Consumer Price Index

Released On 9/14/2012 8:30:00 AM For Aug, 2012

	Prior	Consensus	Consensus Range	Actual
CPI - M/M change	0.0 %	0.6 %	0.2 % to 0.9 %	0.6 %
CPI - Y/Y change	1.7 %			1.7 %
CPI less food & energy	0.1 %	0.2 %	0.1 % to 0.2 %	0.1 %
CPI less food & energy - Y/Y change	2.2 %			1.7 %

Highlights
Higher gasoline prices led to a surge in consumer prices in August. The consumer price index in August jumped 0.6 percent, following no change the prior month. Analysts forecast a 0.6 percent boost. Excluding food and energy, the CPI gained a more modest 0.1 percent, matching a 0.1 percent rise in July. Expectations were for a 0.2 percent rise.

By major components, energy jumped a monthly 5.6 percent after declining 0.3 percent in July. Gasoline on a seasonally adjusted basis jumped 9.0 percent, following a 0.3 percent increase the prior month. Food prices rose 0.2 percent after edging up 0.1 percent in July.

Year-on-year, overall CPI inflation rose to 1.7 percent in August from 1.4 percent the month before (seasonally adjusted). The core rate eased to 1.9 percent from a 2.1 percent in July on a year-ago basis. On an unadjusted year-ago basis, the headline CPI was up 1.7 percent, compared to 1.4 percent in July. The core was up 1.9 percent versus 2.1 percent in July, not seasonally adjusted.

There is something for both wings of the Fed in today's report. Headline is strong and a concern for hawks while the core is soft for the doves.

Market Consensus before announcement
The consumer price index in July came in flat, following no change in June. Excluding food and energy, the CPI increased a modest 0.1 percent, following a 0.2 percent gain in June. Headline softness primarily got help from the energy component. By major components, energy fell 0.3 percent in July after declining 1.4 percent the month before. Gasoline actually rose 0.3 percent, following a 2.0 percent decrease in June. Declines were seen in electricity, piped gas, and heating oil. Food prices edged up 0.1 percent after gaining 0.2 percent in June.
The core rise of 0.1 percent in July ended a streak of four consecutive 0.2 percent increases. Deceleration was largely due to declines in costs for airfare, used cars & trucks, new vehicles, and transportation services. Also, apparel and medical care inflation slowed.

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

2012 Release Schedule

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

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