The seasonally adjusted CPI rose at 5.9 percent annual rate in June, up sharply from the preceding month. However, most of the increase is attributable to anomalous behavior of the seasonal adjustment for gasoline prices
Whitefield CALL GIRL IN 98274*61493 ❤CALL GIRLS IN ESCORT SERVICE❤CALL GIRL
US Inflation Jumps in June. How Concerned Should We Be?
1. Data for your Classroom from
Ed Dolan’s Econ Blog
US Inflation Jumps in June.
How Concerned Should We Be?
July 16, 2013
Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free
to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like
the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.
2. Posted July 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Consumer Price Inflation Jumps Sharply in June
The seasonally adjusted all-items
U.S. consumer price index rose at a
5.9% annual rate in June, up from
1.8% in May.
The index had decreased in March
and April.
Almost all of the variability in the CPI
since the start of the year has come
from energy prices, especially the
price of gasoline. Energy prices
have a weight of 9.5% in the CPI
3. Posted July 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
The Role of Seasonal Adjustment
Seasonal adjustment played an
unusual role in June
Usually, the NSA CPI is more
volatile than the SA version
However, gasoline prices failed to
fall in June, as they usually do.
Seasonal adjustment turned an
actual 0.6 percent increase in the
price at the pump into an adjusted
6.3 percent increase, distorting the
entire CPI for the month.
4. Posted July 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Core Inflation Falls Below 2 Percent
Food and energy prices are volatile
and usually account for much of the
month-to-month change in the CPI
Their effect can be removed by taking
food and energy out of the CPI. The
result is called the core inflation rate.
The annualized core inflation rate for
March was just 1.94 percent, below
the Fed’s 2 percent inflation target
5. Posted July 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Trimmed Mean Inflation Rises Slightly
Another way to remove volatility is
the 16% trimmed mean CPI
published by the Federal Reserve
Bank of Cleveland. It removes the
8% of prices that increase most and
the 8% that increase least in each
month (or decrease most), whatever
they are
The 16 percent trimmed mean CPI
rose at a 2.21 percent annual rate in
June, slightly faster than in May
6. Posted July 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Which Measure is Best?
The CPI for all items gives the most
accurate measure of current
changes in the cost of living
Economists at the Fed look closely
at the core and trimmed mean CPIs,
and at other inflation indicators
derived from the GDP accounts, to
judge the effect of monetary policy
on underlying inflationary trends
7. Posted July 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
Year-on-Year Inflation Continues Downward Trend
Still another way to remove the
effects of both seasonal adjustment
and month-to-month volatility is to
look an year-on-year changes in the
CPI
This chart shows the change in the
CPI from the same month a year
earlier
The trend of inflation has clearly
been downward over the past two
years
8. Posted July 16, 2013 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
The Bottom Line
The bottom line is that June’s jump
in the seasonally adjusted CPI is
little cause for concern.
Measures of underlying inflation
remain subdued. If anything, we
should be concerned that the Fed is
not pushing hard enough to maintain
its 2 percent inflation target
9. Click here to learn more about Ed Dolan’s Econ texts
or visit www.bvtpublishing.com
For more slideshows, follow Ed Dolan’s Econ Blog
Follow @DolanEcon on Twitter