CPI Core Inflation Stays Below 2% for 32nd Month

by: Mark J. Perry

(Click chart to expand)

The BLS released its monthly CPI report today (pdf) for July, here are some highlights:

  1. From July of last year, the all items CPI inflation was 3.6%, the same rate as in May and June (see chart above).
  2. Over the last 12 months through July, food prices have increased by 4.2% (highest since March 2009), overall energy prices by 19%, and gasoline prices by 33.6%. Oil prices have fallen by almost 17% over the last month from mid-July, which would mean that energy inflation has already moderated substantially and will likely be much lower for the the August CPI report. Thanks to the ongoing "shale gas revolution," natural gas prices fell by -2.8% over the last year.
  3. Core inflation (CPI less food and energy) was 1.8% from last July, the highest rate since April 2009, but the 32nd consecutive month below 2% (see chart above).

Despite the recent increases in food and energy prices, core inflation remains low - below 2%. Looking at U.S. inflation rates for overall prices and core prices on a monthly basis back to January 1958 (see graph above), the recent record of U.S. inflation still looks a lot more like the price stability of the late 1950s and 1960s than the inflationary 1970s and early 1980s. One difference is that overall inflation has been much more volatile than core inflation over the last decade, compared with the 1958-2000 period when overall and core inflation moved much more closely together.

And maybe it's that greater volatility in food and energy prices in recent years that makes inflation seem worse than it really is. It still seems hard to make a strong case for 1970s-style inflation when core inflation is below 2%.