We’re getting some mixed signals on the price front. The U.S. CPI just came out, and seems benign enough:
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in February on a seasonally adjusted basis, the same increase as in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.3 percent before seasonal adjustment.
Energy prices have plummeted and I’m sure you’ve been pleasantly surprised at the gasoline pump. However, if you’re like me, you’re wondering why it seems you are poorer every month. In contrast, the PPI for final goods just came out and it was a negative number.
The Producer Price Index for final demand fell 0.6 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.5 percent in January and 0.2 percent in December. (See table A.) On an unadjusted basis, the final demand index increased 1.3 percent for the 12 months ended in February.
Sometimes the answer is in the details. The year-over-year data can be misleading, since it includes earlier periods when prices were indeed more stable or even falling. I prefer at times to examine those items which I ‘must’ buy on a run-rate basis. Yes, I spend lots on gas prices, but these are notoriously volatile and I can’t do much about them except drive less often. I must spend on my own fuel though (food) so I don’t like to ‘exclude’ this when considering what my cost of living is really doing. I’m also not likely to stop spending on clothes, accomodation or medical needs.
Have a gander at the following table (U.S. CPI data):
I admit there’s not much information here. After all, different people (old, young, wealthy, poor) spend a different proportion of their income on different things. However, it confirms what it ‘feels like’ over the past couple of years. Savings in energy costs and lower interest rates are probably subsidizing expenditures on the basics. Once things get back to normal (if that’s even possible) – oil prices rise and interest rates normalize – then consumers will be squeezed.
I’m beginning to understand why there have been so many strikes by laborers and a number of professions of late. Earnings have not really kept pace with the rising cost of necessities.
