By Paul Gomme and Peter Rupert
The BLS announced that the Consumer Price Index (CPI) fell 5.0% on an annualized basis after rising 5.80% in May. The decline was largely due to energy prices, with energy commodity prices falling almost 10%. The year-over-year number came in at 3.46%. The large discrepancy between the monthly annualized number and the year-over-year number highlights the reason for our preferred trend measure, which rose 2.44%. That is, it damps the highly volatile monthly number while responding faster to changes in trend than the year-over-year measure.
The core CPI measure (which excluded food and energy) showed almost no decline, dropping 0.20%. The year-over-year increase was 2.6% and our trend measure grew 1.94%.
While the reduction is certainly welcomed, it appears to be short-lived. The June decline saw an easing in energy prices due to a “potential” scaling back of the crisis in the middle east. More recently, the battles have escalated and so too energy prices.
