FEBRUARY CONSUMER INFLATION IS FLAT

The Consumer Price Index came in flat this morning, showing no change in consumer prices from January through February. According to The New York Times, economists had expected an increase of 0.3%.

Core inflation, which excludes food and energy, also came in unchanged.

From AP via The New York Times:

Consumer inflation, which had been pushing relentlessly higher, posted its mildest reading in six months in February as the costs of energy and food moderated. The relief was expected to be short-lived, given that energy prices have resumed their upward climb.

The better-than-expected February inflation reading will likely be reversed in coming months, considering the big surge in energy prices in recent weeks. Crude oil hit a record high this week above $110 per barrel and gasoline pump prices jumped to a national record of $3.267.

HIGHER FOOD PRICES HURT CONSUMERS

Retail food prices increased 4% in 2007, the largest increase in 17 years. This NBC News video examines the issue.

AVERAGE WORKER WORSE OFF IN REAL TERMS

After adjusting average worker earnings in the past 12 months for inflation, which is a term called "real earnings", workers actually lost 1.2% compared to the previous year. How is this possible? According to the Bureau of Labor Statistics (BLS), earnings increased 3.2% from February 1, 2007 through the end of January of 2008, while inflation increased at a rate of 4.3%, leaving workers with less buying power even though they earned more money.

From USA Today:

Inflation-adjusted earnings for average workers have fallen 1.2% over the last year, the Bureau of Labor Statistics said Wednesday, as higher food and fuel costs have eroded purchasing power.

Earnings adjusted for inflation — also known as real earnings — have fallen for eight of the last 13 months and were down 0.5% in January compared with December, according to the labor statistics agency.

Average weekly earnings were $592.74 in January, or roughly $30,800 a year. While that's about $1,000 a year more than workers averaged in January 2007, inflation has increased at a rate of 4.3% for the same period, outpacing the 3.2% earnings gain.

CONSUMER PRICE INDEX UP 0.4% IN JANUARY

Consumer prices rose more than expected in January led by sharp increases in food, gasoline, and transportation. This data shows that inflationary pressures are gaining, causing many to predict that the Federal Reserve will be forced to keep key interest rates at current levels or potentially raise them, thus fighting inflation, but potentially causing the economy to stall or worse during what many already see as a weak economy.

From The New York Times:

The Consumer Price Index rose 0.4 percent in January, a bigger gain than economists had predicted. Over the last 12 months, the index has surged by 4.3 percent, one of the highest year-over-year rates in decades, the Labor Department said.

The rise was led by increases in the costs of food, gasoline, shelter, and transportation. The so-called core inflation rate, which excludes food and gasoline prices, ticked up 0.3 percent last month.

The core rate is 2.5 percent above its level in January 2007, above the Fed’s recognized comfort zone ceiling of 2 percent.

INFLATION HEATS UP IN CHINA

Consumer inflation in China was reported at 7.1% today, while producer inflation was reported to be at 6.1% on Monday in a separate report. Both measures are annual inflation rates that compare prices in January of 2007 to January of 2006. Some economists believe these figures actually underreport true inflation in China due to the price controls that have been put on some products by the government.

For comparison, the United States consumer inflation rate reported through the Consumer Price Index (CPI) was 4.1% in 2007 versus 2.5% in 2006, while the Producer Price Index (PPI) was 6.3% in 2007 versus 1.1% in 2006.

From The New York Times:

Yu Yongding, the influential director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences and until 2006 a member of the monetary policy committee of China’s central bank, said that high inflation in January meant that the Chinese government was likely to continue pursuing austerity policies.

To fight inflation, China is likely to allow its currency to “appreciate continuously” so as to hold down the cost of imports, despite signs that economic slowdowns in the United States and elsewhere may cool demand for Chinese exports, Mr. Yu said.

“Inflation is the No. 1 enemy for China,” he said in a telephone interview. “It’s affordable for us to sacrifice a little on the growth side to bring inflation under control.”

Chinese exporters are trying to pass on their rising costs to overseas customers, which could contribute to inflation in the United States and Europe.

CONSUMER INFLATION UP 0.3% IN SEPTEMBER

From The New York Times:

Inflation stayed steady in September, indicating that the Federal Reserve has room to cut interest rates again, but most likely not this month.

Prices of consumer goods ticked up 0.3 percent in September, slightly faster than expectations and a reversal of a 0.1 percent decline in August. The core rate, a key gauge of inflation that excludes more volatile food and energy prices, held at 0.2 percent, where it has stood since June, the Labor Department said this morning.

Core inflation rose 2.1 percent since last September — the lowest year-over-year growth in 18 months — suggesting that pricing pressures have stayed in check. But the Fed, which keeps close tabs on inflation to determine its benchmark interest rates, prefers a rate between 1 percent and 2 percent. A bubbling-up of inflation, coupled with recent reports that point to a more resilient economy than analysts had expected, makes it more likely the Fed will keep rates unchanged when it issues its decision on Oct. 31.

CPI DROPS IN AUGUST

Check out the Bureau of Labor Statistics CPI Report here.

From USA Today:

Consumer prices in August fell for the first time in 10 months as another big drop in energy costs offset higher food prices.

The Labor Department reported Wednesday that its closely watched consumer price index dipped 0.1% last month, slightly better than the flat reading that had been expected. It was the first decline in consumer prices since a 0.4% fall in October.

Overall inflation through August is rising at an annual rate of 3.7%, up from a 2.5% increase for all of 2006.

n addition to higher food costs, consumers have also been hit by surging energy prices, which are up 12.7% at an annual rate this year, even with the declines in the past three months. Analysts are worried that further price increases are in the pipeline given the fact that oil prices have now surged to record levels above $80 a barrel.

Core inflation, which the Fed closely monitors, is better behaved this year, rising at an annual rate of 2.3% through August, down from an increase of 2.6% for all of 2006.

The price of medical care continued to surge, rising 0.5% in August. Medical costs are up 4.5% over the past year.