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Plunging Energy Prices Drag Down CPI, Offseting Jumping Food Costs

For the fourth month in a row, the shale-revolution crushing plunge in crude prices managed to push energy costs down, with the BLS reporting that "the gasoline index fell for the fourth month in a row, declining 3.0 percent, and the indexes for natural gas and fuel oil also decreased." As a result, October CPI was unchanged from a month earlier, and up 1.7% from a year ago, below the Fed's 2.0% target. However, stripping away plunging energy prices, things were a little different, with CPI ex food and energy up 0.2%, slightly above the 0.1% expected, and up from 0.1% before. But before everyone screams deflation, here is what also happened: the shelter index, airline fares, household furnishings and operations, medical care, recreation, personal care, tobacco, and new vehicles were among the indexes that increased. And for those few who have to eat, "The index for food at home has risen 3.3 percent over the last 12 months, the largest 12-month increase since April 2012." and "The index for nonalcoholic beverages rose 0.6 percent, its largest increase since September 2012."


In other words, pretty much everything except for gasoline, but luckily no Fed member is every concerned about "those" rising prices. They are noise. One thing however certainly did not increase: real wages.

Here is a table breakdown of the data:

Further details on the key product groups:

Food

 

The food index rose 0.1 percent in October, its smallest increase since June. The index for food at home also rose 0.1 percent, with four of the six major grocery store food groups posting increases. The fruits and vegetables index rose the most, increasing 0.9 percent in October after rising 0.1 percent in September. The index for nonalcoholic beverages rose 0.6 percent, its largest increase since September 2012. The index for dairy and related products increased 0.5 percent, and the cereals and bakery products index rose 0.3 percent. In contrast to these increases, the index for meats, poultry, fish, and eggs, which had been rising sharply in recent months, declined 0.4 percent. The beef and veal index rose 0.3 percent, but the indexes for pork, poultry, and eggs all declined. The index for other food at home also fell 0.4 percent in October. The index for food at home has risen 3.3 percent over the last 12 months, the largest 12-month increase since April 2012. All six major grocery store food groups increased over the span. The index for food away from home rose 0.2 percent in October and has increased 2.8 percent over the last 12 months.

 

Energy

 

The energy index fell 1.9 percent in October, its fourth consecutive decline. The gasoline index declined 3.0 percent in October and has fallen 8.0 percent over the last 3 months. (Before seasonal adjustment, gasoline prices fell 6.3 percent in October.) The index for natural gas also declined in October, falling 2.7 percent after rising in September. The fuel oil index decreased as well, falling 4.0 percent. In contrast to these declines, the index for electricity rose in October, increasing 0.5 percent after declining in September. The energy index has fallen 1.6 percent over the last 12 months. The fuel oil index has declined 6.5 percent and the gasoline index has fallen 5.0 percent. However, the index for natural gas has increased 3.4 percent and the electricity index has advanced 3.1 percent.

 

All items less food and energy

 

The index for all items less food and energy rose 0.2 percent in October after increasing 0.1 percent in September. The shelter index, which rose 0.3 percent in September, increased 0.2 percent in October. The indexes for rent and for owners’ equivalent rent both rose 0.2 percent, while the index for lodging away from home rose 0.7 percent. The index for household furnishings and operations rose 0.4 percent in October, its largest increase since November 2012. The index for airline fares turned up, rising 2.4 percent in October after declining sharply in recent months. The medical care index increased 0.2 percent in October, with the index for prescription drugs increasing 0.7 percent and the hospital services index advancing 0.2 percent. The recreation index rose 0.2 percent, as did the new vehicles index. Also rising were the indexes for personal care, which increased 0.3 percent, and tobacco, which rose 0.6 percent after declining in September. In contrast to these increases, the index for used cars and trucks fell 0.9 percent in October, its sixth consecutive decline. The apparel index also fell, declining 0.2 percent.

Finally for those who have to live somewhere, "The shelter index has risen 3.0 percent over the last 12 months." Almost, but not quite, in line with the real non-increase in wages/