2016 Economic Calendar
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Consumer Price Index  
Released On 6/16/2016 8:30:00 AM For May, 2016
PriorConsensusConsensus RangeActual
CPI - M/M change0.4 %0.3 %0.2 % to 0.6 %0.2 %
CPI - Y/Y change1.1 %1.0 %
CPI less food & energy- M/M change0.2 %0.2 %0.1 % to 0.3 %0.2 %
CPI less food & energy - Y/Y change2.1 %2.2 %

Highlights
Whatever pressure may be building in import & export prices or even producer prices, it has yet to give much of a boost to consumer prices which rose only 0.2 percent in May. Core prices, that is prices excluding food and energy, also came in at plus 0.2 percent.

Year-on-year rates aren't going anywhere, at only plus 1.0 percent for total prices and plus 2.2 percent core prices. Though the 2.2 percent rate does exceed the Fed's 2 percent target, core consumer prices are not what the Fed tracks most closely, rather core PCE prices which typically run 1/2 point lower.

Housing costs rose 0.3 percent and at a year-on-year 2.4 percent are showing tangible pressure. Medical care is at the top of list showing pressure, up 0.3 percent but still at a manageable year-on-year rate of plus 3.2 percent.

Other readings are much flatter, including a 0.7 percent year-on-year rise for food and a 0.5 percent rise for apparel. Energy prices, though rising 1.2 percent in the month, are still down 10.1 percent on the year with gasoline down 16.9 percent.

It's the trend that counts most and the trends for consumer prices are still flat, not yet reflecting the recovery in oil prices. This report does not lift the chances for a rate hike at the July FOMC.

Consensus Outlook
Gasoline prices climbed sharply in May but they aren't expected to inflate the consumer price index where the Econoday consensus is calling for only a moderate gain of 0.3 percent. Excluding energy and also food, the core rate is expected to show even less pressure, at a consensus plus 0.2 percent. Weakness in the core rate would underscore the persistently weak inflation picture and could further push back the outlook for the Federal Reserve's next rate hike.

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. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.

The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group, representing about 87 percent of the population. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.

The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.

The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.  Why Investors Care
 
[Chart]
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
 
[Chart]
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
 
 

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