A Look at Inflation Specifics Over the Past 5 Months

Core CPI [continues to rise, remaining] above the Fed’s inflation target of 2%. [That being said,] how inflation is impacting our personal expenses depends on our relative exposure to the individual components. [Let's take a look at the specifics.]


So says Doug Short (www.advisorperspectives.com) in edited excerpts from his original article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited below for length and clarity - see Editor’s Note below.


Short goes on to say, in part:

The table below shows the annualized change in Headline and Core CPI for each of the past five months. I’ve also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation.


The Trends in Headline and Core CPI

The chart below shows Headline and Core CPI for urban consumers since 2007. Core CPI excludes the two most volatile components, food and energy.

Core CPI has been on the rise and has now risen above the Fed’s inflation target of 2%. However, the more attention-grabbing headline CPI has moderated in recent months after hitting an interim high in September 2011, a decline that was primarily driven by lower energy costs, especially as reflected in the transportation category. This trend, however, appears to be reversing. Gasoline prices have been steadily rising since mid-December…

For a longer-term perspective, here is a column-style breakdown of the inflation categories showing the change since 2000.

Note: For additional information on the component composition of the Consumer Price Index, see: 

Slicing & Dicing Consumer Price Index Data of the Past 11 Years

The Fed justified the previous round of quantitative easing “to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate”. In effect, the Fed has been trying to increase inflation at the macro level, but what does an increase in inflation mean at the micro level — specifically to your household? [Let's take a look and see.] Words: 957

* http://advisorperspectives.com/dshort/updates/Inflation-X-Ray-View.php