Interest Rate Roundup

Wednesday, May 14, 2008

Curious CPI: +0.2% overall, +0.1% core

I've seen a lot of weird numbers in my lifetime, but this latest Consumer Price Index takes the cake. The overall CPI reportedly increased 0.2% in April, down from 0.3% in March. Meanwhile, the "core" (ex-food and energy) CPI gained only 0.1%. That brings the year-over-year rate in CPI inflation down to 3.9% from 4%, and leaves the core CPI YOY gain at 2.3%, down from 2.4%.

But here's where things get curioser and curioser. The CPI figures included a 0.7% drop in the cost of transportation, driven by -- you'll love this -- a "2.0 percent decrease in the index for gasoline." Is there anybody in their right mind who believes gasoline prices are going DOWN? And it gets better. Quoting from the release: "The index for public transportation declined 0.4 percent in April, reflecting a 0.5 percent decrease in the index for airline fares." Is it just me, or haven't we been reading about multiple fare hikes in the past few weeks?

I can understand some of the other decreases, such as the drops in recreation prices, and automobile and lodging costs. They are likely coming down due to the weak economy. But this energy and airfare stuff is just plain hokey. Regardless of what I think, the bond market likes the news for now -- 10-year yields were up to 3.97% before the report. They're down to roughly 3.92% as of this writing.


  • Why are there not good,reliable 3rd party sources for measuring broad inflation measures? Or are there and I have never heard of them?

    I cant think of another instance where there is such widespread mistrust of a product/study and the private sector does not mount competition.

    By Anonymous Anonymous, at May 14, 2008 at 10:04 AM  

  • It appears the US is trying to lose all its credibility. This is probably one of the most absurd reports of any kind ever. To even claim gas went down is so absurd it might be funny, if I didnt have to fill up my car every week

    By Anonymous Anonymous, at May 14, 2008 at 1:27 PM  

  • I've been reading your blog for a year and a half or so, and I really enjoy it. Thanks for all the effort you put into it, and please keep up the good work!

    With bond yields actually up at the end of the day, it looks as if the bond markets at least are no longer drinking the kool-aid. This report is an example of why there's such distrust in government now; are you going to believe your own lying eyes or what the government is telling you?

    By Anonymous Anonymous, at May 14, 2008 at 7:47 PM  

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