CPI: U.S. Consumer Inflation Rising At Fastest Pace In 6 Years

by Ike Obudulu Posted on June 12th, 2018

Washington, D.C., USA: The Consumer Price index, CPI, a measure that tracks consumer prices, shows the cost of living in the U.S. is increasing at the fastest pace in six years fueled by gasoline and shelter indexes increase, data released today, Tuesday, by the U.S. Bureau of Labor Statistics show. The data pointed to moderate inflation pressures.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in May on a seasonally adjusted basis after rising 0.2 percent in April, the U.S. Bureau of Labor Statistics reported.

Over the last 12 months, the all items index rose 2.8 percent before seasonal adjustment. The indexes for gasoline and shelter were the largest factors in the seasonally adjusted increase in the all items index, the biggest advance since February 2012, after rising 2.5 percent in April. The gasoline index increased 1.7 percent, more than offsetting declines in some of the other energy component indexes and led to a 0.9-percent rise in the energy index

Excluding the volatile food and energy components, the CPI rose 0.2 percent, supported by a rebound in new motor vehicle prices and a pickup in the cost of healthcare, after edging up 0.1 percent in April. That lifted the year-on-year increase in the so-called core CPI to 2.2 percent, the largest rise since February 2017, from 2.1 percent in April.

Annual inflation measures are rising as last year’s weak readings fall from the calculation. Economists had forecast both the CPI and core CPI rising 0.2 percent in May.

The inflation data was published ahead of the start of the Federal Reserve’s two-day policy meeting on Tuesday. The U.S. central bank tracks a different inflation measure, which is just below its 2 percent target.

The Fed is expected to raise interest rates for a second time this year on Wednesday. Economists are divided on whether policymakers will signal one or two more rate hikes in their statement accompanying the rate decision.

The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy rose 1.8 percent on a year-on-year basis in April, matching March’s increase.

Food

The food index was unchanged in May after a 0.3-percent increase in April. The index for food at home fell 0.2 percent. The index for meats, poultry, fish, and eggs declined 0.7 percent, while the fruits and vegetables index fell 0.3 percent in May after increasing 1.0 percent in April. The indexes for other food at home, and dairy and related products also declined.

The index for nonalcoholic beverages and beverage materials showed a 0.4-percent increase in May, while the index for cereals and bakery products was unchanged. The index for food away from home rose 0.3 percent in May following a 0.2-percent increase in April. Over the last 12 months, the index for food away from home increased 2.7 percent, and the food at home index rose 0.1 percent.

The index for meats, poultry, fish, and eggs increased 2.3 percent over the last year; the only one of the six major grocery store food group indexes to increase. The remaining indexes declined over the last 12 months.

Energy

The energy index rose 0.9 percent in May after rising 1.4 percent in April. The gasoline index rose 1.7 percent following a 3.0-percent increase in April. (Before seasonal adjustment, gasoline prices increased 5.9 percent in May.) The electricity index rose 0.1 percent in May, and the index for natural gas fell 0.6 percent.

The energy index increased 11.7 percent over the past year, with three of four major component indexes rising. The gasoline index increased 21.8 percent, the fuel oil index rose 25.3 percent, and the electricity index increased 1.0 percent. The index for natural gas fell 0.8 percent over the year.

All items less food and energy

The index for all items less food and energy increased 0.2 percent in May. The shelter index increased 0.3 percent, with the index for rent increasing 0.3 percent and the index for owners’ equivalent rent increasing 0.2 percent. The index for lodging away from home increased 2.9 percent in May, that index’s largest increase since August 2017.The medical care index increased 0.2 percent in May, with the index for prescription drugs increasing 1.4 percent, the index for hospital services increasing 0.5 percent, and the index for physicians’ services increasing 0.1 percent. The new vehicles index increased 0.3 percent in May, while the index for motor vehicle insurance increased 0.4 percent after falling 0.2 percent in April. The indexes for tobacco and for education and communication also increased.

The index for household furnishings and operations fell 0.4 percent in May, after increasing by 0.5 percent in April. The index for used cars and trucks continued to decline, falling 0.9 percent in May after a 1.6-percent drop in April. The airline fares index declined 1.9 percent, and the index for alcoholic beverages also declined. The indexes for apparel and recreation were unchanged.

The index for all items less food and energy rose 2.2 percent over the past 12 months, after increasing 2.1 percent in the 12 months ending March and April. The shelter index rose 3.5 percent over the last 12 months, and the medical care index rose 2.4 percent. Indexes that declined over the past 12 months include those for new vehicles, airline fares, used cars and trucks, and communication.

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased 2.8 percent over the last 12 months to an index level of 251.588 (1982-84=100). For the month, the index increased 0.4 percent prior to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 3.0 percent over the last 12 months to an index level of 245.770 (1982-84=100). For the month, the index increased 0.5 percent prior to seasonal adjustment.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 2.6 percent over the last 12 months. For the month, the index increased 0.4 percent on a not seasonally adjusted basis.

Please note that the indexes for the past 10 to 12 months are subject to revision.

Consumer Price Index (CPI)

The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers. The all urban consumer group represents about 93 percent of the total U.S. population. It is based on the expenditures of almost all residents of urban or metropolitan areas, including professionals, the self-employed, the poor, the unemployed, and retired people, as well as urban wage earners and clerical workers.

Not included in the CPI are the spending patterns of people living in rural nonmetropolitan areas, farming families, people in the Armed Forces, and those in institutions, such as prisons and mental hospitals.

Consumer inflation for all urban consumers is measured by two indexes, namely, the Consumer Price Index for All Urban Consumers (CPI-U) and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is based on the expenditures of households included in the CPI-U definition that meet two requirements: more than one half of the household’s income must come from clerical or wage occupations, and at least one of the household’s earners must have been employed for at least 37 weeks during the previous 12 months.

The CPI-W population represents about 29 percent of the total U.S. population and is a subset of the CPI-U population.

The CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 75 urban areas across the country from about 5,000 housing units and approximately 22,000 retail establishments (department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments).

All taxes directly associated with the purchase and use of items are included in the index. Prices of fuels and a few other items are obtained every month in all 75 locations.

Prices of most other commodities and services are collected every month in the three largest geographic areas and every other month in other areas. Prices of most goods and services are obtained by personal visits or telephone calls by the Bureau’s trained representatives.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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