- The Big Picture - http://www.ritholtz.com/blog -

3.4% Inflation is Worst in 5 years

Posted By Barry Ritholtz On January 20, 2006 @ 5:31 am In Inflation | Comments Disabled

Gr2006011900287
Here’s something that only got minor play this week:  CPI data for December, and the full year were released, and it waren’t purty:

For 2005, inflation rose at the fastest rate since 2,000 — while Personal Income gains failed to keep pace with price  increases.

I’d like to see someone try to spin that positively.

CPI rose 3.4% for the year, despite Consumer Prices declining 0.1% in December, and 0.6% in November. AP noted that this "represented
the first consecutive monthly declines in two years, but both months
were heavily influenced by declines in gasoline and other fuels that
are expected to be reversed in January."

For the full year 2005, Energy prices were up 17.1%, followed by Medical Costs up 4.3%, Housing Prices up 4% and Education 2.4%.

All kinds of Energy went up in price: Gasoline prices were up 16.1 percent, Natural Gas prices jumped by 30.2 percent, and Home Heating Oil was up 27.2 percent. These are huge increases being felt by consumers in their higher heating bills, just about . . . NOW.

This data makes me wonder:  Why do some economists insist on focusing on the core rate? Because volatile food and energy can throw the data off for a month?  With inflation up 3.3% in 2004, and plus 3.4% in 2005, remind me again why we insist on ignoring food and energy?

That makes little sense after 2 consecutive years of significant, broad price increases.

What’s the Fed have to say about this?

Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, stated:  "I think it is too soon to declare that the ‘pass-through risk’ is entirely behind us."


>

Sources:
CONSUMER PRICE INDEX: DECEMBER 2005 [1] (PDF [2])
http://www.bls.gov/news.release/cpi.nr0.htm
File: Download cpi_2005.pdf [3]

  [4]

Consumer Price Index Up 3.4 Pct. in 2005 [4]
MARTIN CRUTSINGER
AP, Wednesday, January 18, 2006
http://sfgate.com/cgi-bin/article.cgi?f=/news/archive/
2006/01/18/financial/f122845S40.DTL&type=business

Inflation Hit Five-Year High of 3.4% Last Year [5]
Wages Didn’t Keep Up, Labor Department Says
Nell Henderson
Washington Post, Thursday, January 19, 2006; Page D01
http://www.washingtonpost.com/wp-dyn/content/article/2006/01/18/AR2006011800412.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2006/01/34-inflation-is-worst-in-5-years/

URLs in this post:

[1] CONSUMER PRICE INDEX: DECEMBER 2005: http://www.bls.gov/news.release/cpi.nr0.htm

[2] PDF: http://www.bls.gov/news.release/pdf/cpi.pdf

[3] Download cpi_2005.pdf: http://bigpicture.typepad.com/comments/files/cpi_2005.pdf

[4]  : http://sfgate.com/cgi-bin/article.cgi?f=/news/archive/2006/01/18/financial/f122845S40.DTL&type=business

[5] Inflation Hit Five-Year High of 3.4% Last Year: http://www.washingtonpost.com/wp-dyn/content/article/2006/01/18/AR2006011800412.html

Copyright © 2008 The Big Picture. All rights reserved.