In September, the headline Consumer Price Index (CPI) increased by 0.09 percent after falling 0.20 percent in August. Rising domestic demand in August helped push up the Consumer Price Index Core by 0.14 percent in September, compared to last months’ 0.01 percent increase. However, industrial production has caught up and consumer demand has cooled, suggesting a moderating inflationary climate in coming months. Slowing global economic growth and falling oil prices provide further support for that outlook.
As the economy continues its recovery, inflation plods along at a low, positive rate. July saw the broad CPI increase just under 0.1 percent. Core inflation, excluding food and energy, also saw modest monthly growth of 0.1 percent. However, labor market tightening and real disposable income growth have increased the upward pressure on inflation and inflation expectations.
The Federal Reserve’s quantitative easing policy ignited inflationary fears, but inflation as measured by the Consumer Price Index has remained low for several years. The QE program began in late 2008 as an attempt to stimulate the economy out of recession. Three rounds of quantitative easing have totaled $3.5 trillion.
The headline data again suggest next to no change in prices. November actually saw declines across several measures of inflation. A strengthening economy coupled with a sustained influx of money from the Fed has economists shrugging their shoulders and squawking, “Where’s the inflation?”
According to the official Bureau of Labor Statistics news release, the Consumer Prices Index (CPI) rose 0.2 percent in September (seasonally adjusted). What the report did not say is that while overall price levels rose 1.2 percent over the last 12 months, all of that increase was in the last five months. An increase of 1.2 percent in five months is very different from 1.2 percent in 12 months.