Econoday Economic Report: Consumer Price Index January 19, 2012

2012 Economic Calendar

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Consumer Price Index

Released On 1/19/2012 8:30:00 AM For Dec, 2011

	Prior	Consensus	Consensus Range	Actual
CPI - M/M change	0.0 %	0.1 %	-0.1 % to 0.2 %	0.0 %
CPI - Y/Y change	3.4 %			3.0 %
CPI less food & energy	0.2 %	0.1 %	0.1 % to 0.2 %	0.1 %
CPI less food & energy - Y/Y change	2.2 %			2.2 %

Highlights
Consumer price inflation was nonexistent in December at the headline and core levels. The consumer price index in December was unchanged for the second month in a row with lower energy costs playing a key role. The December figure was lower than market expectations for a 0.1 percent rise. Excluding food and energy, the CPI decelerated to a modest 0.1 percent increase after gaining 0.2 percent in November. Market expectations were for a 0.1 percent rise.

By major components, energy dipped 1.3 percent after declining 1.6 percent in November. Gasoline fell 2.0 percent, following a 2.4 percent decline in November. Food price inflation firmed to 0.2 percent after rising 0.1 percent the prior month.

Within the core, upward pressure was seen in medical care, recreation, and rent. Declines were seen in used cars & trucks, new vehicles, and apparel.

Year-on-year, overall CPI inflation posted at 3.0 percent, compared to 3.4 percent in November (seasonally adjusted). The core rate edged held steady at 2.2 percent on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.0 percent in December versus 3.4 percent in November. The core was up 2.2 percent, matching November's rate.

The latest CPI report continues to give the Fed leeway for continued loose monetary policy. Year-ago rates are above the implicit Fed target range for inflation but on the margin, they are coming down as some Fed officials have predicted. Between favorable jobless claims, housing starts & permits, and low inflation, equity futures are moderately positive.

Market Consensus before announcement
The consumer price index in November was unchanged after declining 0.1 percent in October. Excluding food and energy, the CPI increased 0.2 percent after a 0.1 percent advance in October. By major components, energy fell 1.6 percent after declining 2.0 percent in October. Food price inflation increased 0.1 percent after rising 0.1 percent the prior month. Within the core, the indexes for shelter, medical care, apparel, and personal care all rose. On the down side for November, indexes for new vehicles and for used cars and trucks declined.

Definition
The Consumer Price Index is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. That is the index shows the change in price levels since the index base period, currently 1982-84 = 100. Monthly changes in the CPI represent the rate of inflation. Why Investors Care

It is always a good idea to look at more than a few months of data to get a sense of changes in established trends. Monthly changes in the CPI are mainly volatile because of sharp fluctuations in food and energy prices. The core CPI eliminates the sharper fluctuations.
Data Source: Haver Analytics

Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core CPI does not fluctuate as much as the total CPI.
Data Source: Haver Analytics

2012 Release Schedule

Released On: 1/19 2/17 3/16 4/13 5/15 6/14 7/17 8/15 9/14 10/16 11/15 12/14

Release For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov