Does the Labor Department’s latest consumer price report prove that “inflation is still a remote concern”?Posted: October 15, 2009
The U.S. Labor Department’s consumer price report is being touted as evidence that “inflation is still a remote concern for the American economy” and is said to prove that there is “no threat of inflation.” Let’s take a look at the numbers:
On the whole, it is true, this report does not show signs of much inflation. There are a few sectors, however, in which prices moved substantially higher. Prices of both new vehicles and used vehicles rose substantially (0.4 percent and 1.6 percent, respectively). (This, of course, isn’t news to Inflation Watch readers.)
The price of medical care commodities rose 0.6 percent, the largest increase since February 2009. The price of transportation services rose by 0.7 percent, also the largest increase since February 2009. The price of medical care services rose by 0.4 percent, the largest increase since April 2009. Energy prices jumped 0.6 percent–a much smaller increase than in August, but a large price increase nonetheless.
The biggest question mark going forward is shelter. The shelter component of the Consumer Price Index has basically been flat all year. But with strong upward momentum in housing prices in many post-bubble markets, such as Las Vegas and San Diego, it is by no means clear that price stability in this sector will continue.
Moreover, food prices, which were down slightly in September, are likely to start edging higher before the end of this year. Prices of some agricultural commodities, such as corn and milk, are up sharply in recent weeks.