Inflation Returns on Gas

The Consumer Price Index increased 0.4% for May, as gasoline increases by 10.4%.  Energy overall was up 4.3%.  Inflation without food or energy prices considered increased 0.1% for the month and was the smallest increase since last December.  Believe it or not, from a year ago overall inflation is unchanged.   CPI measures inflation, or price increases.



The flat yearly inflation is shown in the below graph as the annual decline in gasoline prices really gave a break to consumers.


CPI year ago change


Core inflation, or CPI with all food and energy items removed from the index, has increased 1.7% for the last year.  Core CPI is one of the Federal Reserve inflation watch numbers and 2.0% per year is their target rate.  While all are predicting interest rates will rise, Federal Reserve Chair Janet Yellen has testified that the low inflation numbers are a a concern since increased interest rates would lower economic activity.  Most in the press screamed this month means the Fed will raise interest rates, yet one can see from annual inflation it's really tame, so expect any Fed increase to be very small.  Graphed below is the core inflation change from a year ago.



Core CPI's monthly percentage change is graphed below.  This month core inflation increased 0.1%, as shelter only increased 0.3% and hotels, motels dropped -2.0% for the month.


core cpi


The energy index overall increased 4.3% for the month, but is still down -16.3% from a year ago.   The BLS separates out all energy costs and puts them together into one index.  Gasoline by itself increased 10.4% for the month while fuel oil increased only 0.7%.  For the year, gasoline has declined -25.0%, while Fuel oil has dropped -27.6%.  Natural gas had no change while Electricity dropped -1.2%.  From a year ago national gas prices have declined -15.4% and electricity is still very tame, with a 0.5% increase.  Graphed below is the overall CPI energy index.


CPI energy index


Graphed below is the CPI gasoline index only, which shows gas prices wild ride and recent increases.


CPI Gasoline


Core inflation's components include shelter, transportation, medical care and anything that is not food or energy.  The shelter index is comprised of rent, the equivalent cost of owning a home, hotels and motels.   Shelter increased 0.2% and is up 2.9% for the year.  Rent increased 0.3% for the month, 3.5% for the year.  Graphed below is the rent price index.


cpi rent


Medical care services increased 0.2% and has increased 2.5%.  Graphed below is the overall medical care index change of 2.8% from a year ago.


CPI Medical index


Below is a graph of the medical commodities index, which is mostly prescription drug prices.  The index increased 0.4% for the month and is up 3.9% for the past year.


CPI Medical commodities


Food prices had no change for the month.  Food and beverages have now increased 1.6% from a year ago.  Groceries, (called food at home by BLS), decreased -0.2% for the month, and is up 0.6% for the year.   Eating out, or food away from home increased 0.2% from last month and is up 3.0% from a year ago.


CPI food index change


Graphed below are groceries, the food at home index.  CPI is calculated using substitution, which claims consumers substitute hamburger for steak if prices rise on steak and somehow that's the same thing.


food at home


Individual food items so one gets a better feel for what is going on.  Fruits and vegetables increased 0.3% for the month and dairy declined -0.75%  Beef & veal dropped by -2.5% and is up 9.7% for the year.  Our favorite index, beef steak, increased 0.8% for the month and has increased 10.0% for the year.

Real hourly earnings decreased by -0.1% for all employees.  Real means wages adjusted for inflation.  The average real wage is now $10.54 and has increased 2.2% from a year ago.  Weekly real earnings have increased 2.3% for the year but are down -0.1% for the month.  Real weekly earnings now stand at $363.29.

CPI details

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, so can food.  Additionally CPI uses substitution, so if flour goes through the roof, somehow we're all just fine with oats and prices didn't really overall increase much. Here is the BLS CPI site, where one can find much more details, information on calculation methods and error margins.

Other CPI report overviews, unrevised, although most graphs are updated, are here.   If you're wondering why the graphs display different figures from the text, the graphs calculate percentages from the index and do not round.  The actual data from the BLS report does round to one decimal place. In other words, 0.05% is rounded to 0.1%.

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