Consumer Price Index Remains Steady in June

Written by: John Landers

Consumer Prices, which dropped 0.3 percent in the month of May, remained unchanged for the month of June, according to data released by the Labor Department. On a year-over-year basis, the seasonally adjusted basis for the All Urban Consumers (CPI-U) increased 1.7 percent.

The energy index decline in June by 1.4% has fallen for three consecutive months — 4.3 percent in May and 1.7 percent in April. The fuel oil index led the decline in the energy index, dropping 7.9%; gasoline felled 2.0%. The natural gas index increased 1.7%.

The food index increased 0.2% for the month of June. Consumers paid more for fruits, vegetables and meats. In response to sluggish sales, some grocery stores plan to implement more price reductions to bring in more consumers. Craig Herkert, the CEO of Supervalu, the country’s third-largest grocery chain said   that consumer “price sensitivity” has caused many retailers “to become even more aggressive on promotions and price investment.”

Prices for used cars remained stable; new car prices rose by 0.2%. Airfares declined and rent prices recorded its smallest gain since September.

Year-to-Year Inflation Data

Inflation on a yearly basis has held in check with the Fed mandate to keep inflation within 2%. The June number of 1.7% was the same rate as May 2012. Following are the annual rates for individual components:

  • Food index: 2.7%
  • Energy index: -3.9%
  • All items less food: 2.2%

The senior economist for Moody’s Analytics Ryan Sweet said, “Inflation is not a concern at this time.” Sweet states the Federal Reserve Board has the primary concern of the lack of economic growth. He believes quantitative easing may be the Fed’s next move. Some Fed officials hinted at the possibility of more action after their meeting last week. The Fed predicts that inflation would remain in check through 2014.

The Consumer Price Index represents the broadest measurement employed by the Labor Department because the gauge includes goods and services. Approximately 60 percent of the CPI measure prices for a wide variety of services, including   fees paid for hospital services, airline fares, and movie tickets and rent rates. The import-price index dropped 2.7%, which is the decline since December 2008.

The Producer Price Index (PPI) rose 0.1% in June – it first gain in the last four months. Higher food prices fuel the increase in the PPI. Many economist view the PPI as the first indicator of monthly inflation. The Producer Price Index measures wholesale prices for capital equipment and consumers goods. This indicator considers price changes in about 3,450 different commodities.


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Consumer Price Index Remains Steady in June

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