Yesterday we had news that the Consumer Price Index (CPI) for April rose by a less-than-expected 0.2 percent. That lowered the year-over-year rise in consumer prices to 3.9 percent, down from 4 percent the prior month. The market cheered the news, bidding up share prices by a healthy margin on expectations that inflation will continue to abate. But picking apart the data we weren’t all that impressed.
For instance, thanks to a “seasonal adjustment” the CPI counted gasoline prices as having fallen 1.9 percent in the month. Excluding the seasonal adjustment, however, gas prices actually rose 5.6 percent in April. With gas prices having risen even further in May, next month’s CPI is likely to come in a bit hot.
Food prices, meanwhile, as measured by the government’s data collectors, staged their biggest one-month gain in a generation, climbing 0.9 percent in April. On a year-over-year basis the CPI says food prices have climbed just 5.1 percent in the past year. But let’s face it, a quick glance at your weekly grocery bill will likely tell you that the CPI number is understating real life conditions by a wide margin.Read more...
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