The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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June 14, 2006

The May Inflation Report: Insert Something Negative Here

Egad.  The bad news, from the Cleveland Fed:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.4% (4.3% annualized rate) in May. The median CPI is a measure of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.4% (5.5% annualized rate) in May. The CPI less food and energy rose 0.3% (3.6% annualized rate) on a seasonally adjusted basis.

Over the last 12 months, the median CPI rose 3.0%, the CPI 4.2%, and the CPI less food and energy 2.4%.

The owner's equivalent rent component of the CPI -- discussed here a few days ago -- continues to rear its ugly not-so-little head:




That's an impressive contribution, but it is not the case that the inflation statistic is being distorted by this one component of the CPI.  Here's the distribution of non-energy price changes, weighted by expenditure shares:




In case you are too depressed to do the arithmetic, that picture means about two-thirds of the components in the CPI increased at a rate well above what most of us have come to know as the "comfort zone."  That's only one month's data, of course, but as a reminder here was the (total) distribution from the April report...




... and here was the detail from the March report:




If you have a positive spin on any of this, feel free to share with the class.

Many thanks to super inflation-analyst Linsey Molloy for sharing her pictures with me.   I'm pleased to share them with you too:

Download Histogram_0606.ppt

Download OER.ppt 

UPDATE: Barry Ritholtz says relax, the June FOMC meeting was in the bag anyway and August is in a far away land.  William Polley agrees, but I think believes that August is less of a question mark than does Barry.  Andrew Samwick, obseessing less than many of us about what the Fed will do next, nonetheless despairs the real average weekly earnings of nonsupervisory production workers have declined.  The Skeptical Speculator puts the inflation report in the context of other economic news of the day, here and around the world.

June 14, 2006 in Data Releases , Inflation | Permalink


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Yes, I wouldn't quite call August a sure thing yet, but we're moving in that direction. If things don't change on the inflation front, it will become very hard to call a pause in August. I'm not giving up on the possibility of an improvement, but I don't think it's extremely likely.

Posted by: William Polley | June 15, 2006 at 12:30 PM

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