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Except for Inflation, there’s no Inflation
Posted By Barry Ritholtz On September 16, 2005 @ 7:29 am In Economy,Fixed Income/Interest Rates | Comments Disabled
So let me make sure I completely understand this: If we back out all of the inflationary data from the CPI, and PPI, there is, um, no inflation?
Thanks for clarifying that.
While the Dismal Set — and the majority of CNBC guests — continue to spout such foolish nonsense, its nice to see that at least the WSJ wasn’t bamboozeled. Their online headline read: Consumer Prices Climb 0.5% 
"Gasoline prices shot up 8.3%, the biggest increase since February 2003.
Food prices, however, were unchanged for the first time in nine months.
Medical-care prices were unchanged after nearly 30 years of increases.
Housing prices grew more slowly in August, falling to a 0.2% rate from
0.4% in July. Automobile prices fell 0.5%, half the rate of decline
recorded in July."
You can see more from the dismal set below  . . .
UPDATE I: September 16, 2005 10:54 am
Its the ultimate Hedonic adjustment: Chart of the Day  shows us graphically that without the items that are going up in price, there is hardly any inflation at all!
UPDATE II: September 17, 2005 11:54 am
The first official chart from the weekend WSJ:
UPDATE III: September 24, 2005 2:54 pm
Here’s a round up of all our recent discussions  on inflation
Consumer Prices Climb 0.5% 
Katrina Helps Propel Jobless Claims
To Highest Level in Nearly 10 Years
WALL STREET JOURNAL, September 15, 2005 5:44 p.m.
Consumer prices rose 0.5% in August, but excluding volatile food and energy costs, the core inflation rate held steady at 0.1%. Economists, who weren’t surprised by the numbers, weighed in on the post-Katrina inflationary effects of energy prices and what the trends might mean for the Federal Reserve’s meeting on interest rates next week. Following are a handful of economists’ reactions.
Please name the few Economists you think make some sense, based upon their quotes, in the comments section (below).
Core consumer inflation appears to have peaked after rising for most of the past 18 months.
– Steven Wood, Insight Economics
* * *
[P]rospects for a reversal of recent energy-price increases and the absence of other fundamental inflationary pressures indicates inflation provides no significant justification for raising interest rates further at this time.
– Peter Morici,University of Maryland
* * *
[W]hile core inflation could well inch up in the coming months, particularly as some of the recent surge in energy prices leaks through, it is unlikely to accelerate by enough to scare the Federal Reserve into a more aggressive tightening mode. We continue to think that a trend of [quarter percentage point] tightening moves are likely at upcoming Federal Open Market Committee meetings (although the aftermath of Hurricane Katrina could cause a temporary pause in the process).
– Joshua Shapiro, MFR Inc.
* * *
[We] are still concerned about the potential for either energy price pass-through or higher inflation expectations becoming embedded in the economy as a result of high gasoline prices.
– John Ryding, Bear Stearns
* * *
Since more than 90% of the prices in the August survey were collected before Hurricane Katrina struck, the September and October headline CPI numbers will likely be even higher. … Given recent increases in airline ticket prices and the increasing ability of shippers and truckers to pass on higher fuel prices, we will likely see an acceleration of core inflation in the next few months. … Currently Global Insight predicts that the Fed will take a breather in one or both of the next two meetings, before resuming its tightening cycle.
– Nariman Behravesh, Global Insight
* * *
[T]he headline CPI could be up as much as 0.8% in September mainly because of surging prices at the gas pump. … We expect to see only a slight uptick [in core inflation] in coming months partly reflecting a reversal of the [downside] quirk in hotel rates. … [W]e look for the core CPI to reach +2.7% by the end of 2006 as some of the recent energy spike is gradually passed through to prices of other goods and services.
– David Greenlaw, Ted Wieseman, Morgan Stanley
Economists React 
Wondering When Energy Costs Will ‘Leak’ Into Core Prices
September 15, 2005 11:04 a.m.
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2005/09/except-for-inflation-theres-no-inflation/
URLs in this post:
 Consumer Prices Climb 0.5%: http://online.wsj.com/article/0,,SB112678676740241720,00.html
 dismal set below: http://bigpicture.typepad.com/comments/2005/09/except_for_infl.html#more
 Chart of the Day: http://www.chartoftheday.com/20050916.htm?t
 Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/core_inflation.gif
 Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/inflation.jpg
 recent discussions: http://bigpicture.typepad.com/comments/2005/09/Inflation_Round.html
 Economists React: http://online.wsj.com/article/0,,SB112679027103541749,00.html
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