CPI Shows Inflation Dropped -0.4% on Volatile Gas Prices in April 2013

The April Consumer Price Index dropped -0.4% from March.  CPI measures inflation, or price increases.  The culprit is gas prices again, which plunged -8.1% for the month.  This is the biggest monthly decline in overall CPI since December 2008, when the economy was at risk of a deflationary spiral.  Take food and energy items out of the index and CPI actually rose 0.1% from March, so once again volatile retail gasoline prices are wreaking havoc in the overall consumer price index, as well as consumer's monthly budgets.



CPI is now up 1.1% from a year ago as shown in the below graph.  This is the lowest annual overall CPI increase since November 2010.



Core inflation, or CPI minus food and energy items, increased 0.1% for April.  Core inflation has risen 1.7% for the last year and is the lowest annual increase since June 2011.  Core CPI is one of the Federal Reserve inflation watch numbers and 2.0% is their boundary figure.   These figures are actually surprising, considering the Fed has been engaging in quantitative easing, which usually increases commodity prices.  Graphed below is the core inflation change from a year ago.



Core CPI's monthly percentage change is graphed below.  The ten year average for core inflation has been a 1.9% annual increase.


core cpi


Core inflation's components are a mixed bag.    Shelter increased 0.2% and is up 2.2% for the year.  The shelter index is comprised of rent, the equivalent cost of owning a home, hotels and motels.  Rent increased 0.2% for the month.  Airfares decreased -0.7%.  Buying an auto increased as new cars and trucks prices increased 0.3% for the month and used jumped by 0.6%.  Clothing declined as apparel dropped by -0.3%.  Transportation services prices also dropped by -0.2% for the month.   Graphed below is rent, where cost increases hits people who can least afford it most.


cpi rent


A core inflation cost which almost never drops is medical care.  Medical care services decreased -0.1% and have increased 3.4% over the last 12 months.  Nowhere else do we see a ridiculous, constant increase in costs every single month, so this must be an anomaly.  You'll never see the below graph of Medical care services change from a year ago go below zero, unlike other item prices. The overall Medical care index, a separate inflation index tracker on all medical costs was unchanged in April.  The last time the Medical care index didn't increase was July 2010,


CPI Medical


Food and beverages overall increased 0.2% and have increased 1.5% from a year ago. The food at home index (think groceries) increased 0.1% for the month and is up 1.0% for the year.  Eating out, or food away from home increased 0.3% from last month, the largest increase since August, and is up 2.3% from a year ago.



Energy overall plunged -4.3% for April, and energy costs are now down -4.3% for the entire year.  Last month the energy index declined by -2.6%.  In February the energy index increased 5.4%, so we can see some wild swings in energy costs.   The BLS separates out all energy costs and puts them together into one index and this one includes gasoline.  Energy commodities plunged by -7.9%.  Fuel oil decreased -4.4%, natural gas increased 4.4% and electricity increased 0.5% for the month.  This is the largest monthly increase for natural gas since July 2008.  Energy costs are also mixed in with other indexes, such as heating oil for the housing index and gas for the transportation index. Below is the overall CPI energy index, or all things energy.



Graphed below is the household energy index which includes electricity and natural gas, shown by monthly percentage change.  This month the index increased 1.0%.  From this time last year household energy has increased 1.9%.  This is a different, special index to show the overall costs for energy into your home only, (unless you drive your car in your mansion or run generators for your tent) and represents about 4.1% of month assumed expenditures.


household energy CPI


Graphed below is the CPI gasoline index only, which shows the volatility of gas prices.



Below are gas prices, last updated  May 13th, where gas was $3.606/gal., although you couldn't get that if you lived in the Northwest, where consumers repeatedly get gouged for a period.  At the beginning of April, gas was $3.645/gal.  By May 13th, gas was pretty much back up to the same prices as the beginning of April.  Assuming this continues, we can expect gas to soar by percentages again in May, so this month's CPI decline is most likely temporary.



According to the BLS, for the year, food and beverages, which includes food at home, made up 15.3% of the index.  Housing is 41% and transportation, including gas for the car, is 16.9% and all energy is 9.5%.  Medical care is only 7.2%, they claim, which goes to show what averages can remove.  Most people are not sick and why the average costs are so low.  A Medical event can bankrupt a family, with insurance. 

CPI-W is used to calculate government transfer payments, such as social security increases.  The cost of living adjustment (COLA) for social security and other government payments will be 1.7% for 2013.   For April, CPI-W decreased -0.2%, and not seasonally adjusted for the year has increased 0.9%.


CPI details

The DOL/BLS does take yearly surveys on where the money goes in the monthly budget, but as one can see, food and energy are significant amounts of the monthly finances.  Run away costs in these two areas can break the bank, so can food.  Additionally CPI uses substitution, so if steak goes through the roof, somehow we're all just fine with hamburger and prices didn't really overall increase much. 

Other CPI report overviews, unrevised, although most graphs are updated, are here.   If you're wondering why the graphs look weird, the graph calculates percentages from the index and doesn't round.  The actual data from the BLS report does round to one decimal place. In other words, 0.05% is rounded to 0.1%.

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