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Tuesday, August 19, 2008

US Inflation Data - August 2008 Release Summary

United States Inflation Data for June and July 2008 released during August 2008.

Aug 4: June PCE up 0.6%
  • Personal consumption expenditures (PCE) increased $57.1 billion, or 0.6%.
  • The PCE price index increased 0.8% in June, compared with an increase of 0.5% in May.
  • The PCE price index, excluding food and energy, increased 0.3%, compared with an increase of 0.2%.
  • Real PCE, PCE adjusted to remove price changes, decreased 0.2% in June, in contrast to an increase of 0.3%t in May.
  • PCE News Release text and PCE archive
Aug 14: July CPI up 0.5%
  • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5% in July.
  • The July level of 219.964 (1982-84=100) was 5.6% higher than in July 2007.
  • On a seasonally adjusted basis, the CPI-U advanced 0.8 percent in July, following a 1.1 percent increase in June. The index for energy rose sharply for the third straight month, increasing 4.0 percent in July and accounting for about half of the overall increase in the all items index.
  • Core CPI, the index for all items less food and energy, increased 0.3 percent in July, the second straight such increase.
  • CPI News Release and CPI archive
Aug 19: July PPI up 1.2% vs. 0.3% Expected
  • Led by higher by prices for food and energy, the U.S. Producer Price Index, PPI, soared 1.2% in July. This 1.2% gain was four times higher than the average of economists guesses of 0.3%.
  • Stripping out volatile food and energy, core PPI gained 0.7%
  • Year-over-year, PPI gained 9.8% over July 2007
  • PPI News Release text and PPI archive
Chart of CPI, Core CPI, PPI and Core PPI

More Reading:

An Examination of the Difference Between the CPI and the PCE Deflator
Abstract: Both the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA) produce measures of the change in prices that consumers pay on the goods that they consume. While these measures tend to agree in broad historical trends in prices, they sometimes give different pictures of inflation over short horizons.

There are several reasons why these two indexes differ. First, the two indexes use different formulas. For the period in question, the CPI is a Laspeyres index, while the BEA product is a Fisher Ideal index. Second, the two indexes have different underlying concepts. The BLS product measures the prices paid by (urban) consumers, while the BEA product measures the prices of final consumption goods, wherever they are purchased. Finally, even when there is significant agreement across indexes in the broad outlines of coverage, differences in how the detailed components are implemented lead to differences in how prices are measured and differences in the weights attached to specific series.

We quantify the magnitudes of each of these factors. There is no one “smoking gun” that explains the discrepancy between the indexes. Rather, the overall discrepancy is the result of the accumulation of a number of small effects.

Charts courtesy of

Kirk Lindstrom's Investment Letter Performance

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