Thursday, May 16, 2013

Consumer Price Index

Consumer Price Index
Released On 5/16/2013 8:30:00 AM For Apr, 2013
PriorConsensusConsensus RangeActual
CPI - M/M change-0.2 %-0.3 %-0.4 % to 0.1 %-0.4 %
CPI - Y/Y change1.5 %1.1 %
CPI less food & energy0.1 %0.2 %-0.1 % to 0.2 %0.1 %
CPI less food & energy - Y/Y change1.9 %1.7 %
Highlights
Headline inflation continues downward but the core rate remains on a moderate upward trend but below the Fed's target rate. The consumer price index for April fell 0.4 percent after declining 0.2 percent in March. April's rate came in below market expectations for a decrease of 0.3 percent. The core CPI-excluding food and energy was soft, matching the March rate of 0.1 percent. Analysts forecasted a 0.2 percent gain.

By major components outside the core, energy fell 4.3 percent, following a drop of 2.6 percent in March. Gasoline decreased 8.1 percent, following a decline of 4.4 percent. The food component rose 0.2 percent after no change in March.

For the core measure, the indexes for shelter, used cars and trucks, new vehicles, and tobacco all increased in April. These increases were partially offset by declines in the indexes for apparel, airline fares, and recreation.

Year-on-year, overall CPI inflation decelerated to 1.1 percent from 1.5 percent in March (seasonally adjusted). The core rate slowed to 1.7 percent in April from 1.9 percent the month before. On an unadjusted year-ago basis, the headline CPI in April was up 1.1 percent and the core was up 1.7 percent.

Again, both the headline and core CPI inflation rates remain below the Fed's "trigger" of 2.5 percent for potential changes in policy. The April report will let the Fed stay loose. And lower gasoline prices will be good for consumer confidence.
Market Consensus before announcement
The consumer price index for March declined 0.2 percent after jumping 0.7 in February. The core CPI-excluding food and energy-slowed to a 0.1 percent pace, following a 0.2 percent rise the month before. By major components outside the core, energy decreased 2.6 percent, following a jump of 5.4 percent in February. Gasoline dropped 4.4 percent after surging 9.1 percent. The food component was unchanged after a 0.1 percent rise in February. For the core measure, the indexes for shelter, used cars and trucks, medical care, personal care, and airline fares all rose in March. These increases more than offset declines in the indexes for apparel, household furnishings and operations, and tobacco.
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
 
[Chart]
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
 
[Chart]
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