The August Consumer Price Index, which measures inflation, increased 0.4% from last month. Food increased 0.5% and energy 1.2%. Core CPI, or price increases minus food and energy costs, rose 0.2%. Core CPI is a Federal Reserve inflation watch number. For the year, not seasonally adjusted, the Consumer Price Index for all Urban Consumers (CPI-U) has risen 3.8%. In July CPI also increased by 0.5%.
The yearly numbers on core inflation are hitting increase percentages which occurred before the late 2008-2009 deflationary period, which was caused by a global slowdown. From the CPI data release:
The 12-month change in the all items index edged up to 3.8 percent after holding at 3.6 percent for three months, while the 12-month change for all items less food and energy reached 2.0 percent for the first time since November 2008. The energy index has risen 18.4 percent over the last year, while the food index has increased 4.6 percent.
Below is the monthly percentage change in CPI-U, all items. U stands for Urban consumers.
The core CPI, or all items less food and energy, percentage increase same as last month. Shelter is up 0.2%, with rent increasing 0.4% and home owners equivalent rent of primary residence also increasing 0.2%. Medical care increased 0.2%, clothing up 1.1%, used autos increased 0.9%, but new cars was flat, or no change from July. Hotels, motels decreased -1.8%, furniture increased 0.3%, public transportation increased 0.6% and education up 0.3%. Renting increasing is a reflection of the housing market, an increased demand for rentals.
Core CPI's monthly percentage change is graphed below. As we can see, overall, without energy and food, inflation for the 4th time is showing up. If you're wondering why the percent changes are different from July, it's because the graphs and hand calculations have two decimal places of accuracy, whereas the CPI report rounds percentages to one decimal place.
Below is the St. Louis FRED graph to show the overall index on core CPI, or CPI without food and energy included. We are seeing an acceleration uptick in core although the recession, which includes the last 2008-2009 portion of the graph was deflationary.
Food and beverages as well as groceries increased, 0.5% in August and the food index is up 4.4% for the year. Food at home, or groceries, increased 0.6% and is up 6.0% for the year. Dairy increased 0.9%, baked goods, 1.1% (which could be reflected in wholesale eggs). Weird, fats increased 0.9% and is up 10.8% for the year and sweets increased 1.2% for August. Just what we need, an increase in the demand for sugar and fat? The graph below is food, which includes food at home and restaurants.
Energy overall increased 1.2%. Gas alone increased 1.9% for August and is up 32.4% for the year. That said, the report notes before seasonal adjustment, gas dropped -0.5%. While the seasonal adjustment algorithm has an intervention adjustment for major events, like Hurricanes, it's unclear if it took into account events like Libya on gas prices this report. Household energy increased 0.4%. Below is the CPI-U Energy Index.
Below are gas prices, last updated September 12th. Notice the oil bubble in early 2008 and notice how close gas prices are now to that previous oil bubble. Bear in mind this CPI report is for August.
The CPI energy index, capturing the last oil bubble below, is all energy, gas, natural gas, fuel oil and so on. Notice it's dip and return versus the food index as well as how it's not as high as the CPI energy index was during the oil commodities bubble of 2008.
The Medical index increased 0.2% for the month and Medical care increased 0.2%, with services increasing 0.3%. Medical commodities are things like your prescription drugs and it increased 0.1% from last month. Strange isn't it, that Medical care is never mentioned when referring to costs and inflation. It's only as important as food, yet health care is treated almost like it's an extra for daily living. For the last six months hospitals are up 6.1% while personal computers, cell phones are down -13.6%. So you may not be able to get medical care, but good lordy, you can blog about it.
There has been much criticism as of late that the Federal Reserve only focuses in on core CPI, instead of food and energy. According to the BLS, Food and beverages, which includes food at home, makes up 14.8% of the index. Housing is 41.5% and transportation, including gas for the car, is 17.3%. Medical care is only 6.6%, which frankly, we hope to examine later as not being a reality percentage. All items minus food and energy are considered 77.2% of the total price expenditures for consumers.....according to them.
Regardless, this increase in core CPI will probably get the Fed's attention.
The DOL/BLS does take yearly surveys on where the money goes in the monthly budget, but as one can see, food and energy are significant amounts of the monthly finances. Run away costs in these two areas can break the bank. Considering we have price deflation in housing due to the real estate sector bubble pop, it's strange for food and energy consumer prices to be dismissed when crafting monetary policy, dismissed as volatile. A year of data to me, isn't volatile enough to dismiss, especially when these are key critical needs for regular people.
CPI-W for the month, unadjusted was 223.326 , a +0.3% increase from last month and a 4.3% increase for the year. CPI-W is used to calculate government transfer payments, such as social security increases.
Note the the chained CPI-U also increased 0.3%, 3.6% for the year and this is not seasonally adjusted. Chained CPI is in 2005 dollar values, which has a flattening effect on real inflation, thus flatting cost of living adjustments if used.
Last month's CPI report overview, unrevised, although most graphs are updated, is here.