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March Consumer Price Index: Headline CPI Up Slightly, Core CPI Essentially Unchanged

May 17, 2016

by Doug Short

The Bureau of Labor Statistics released the April CPI data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 1.13%, up from 0.85% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.15%, little changed from the previous month's 2.19%.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.1 percent before seasonal adjustment.

The seasonally adjusted all items increase was broad-based, with the indexes for food, energy, and all items less food and energy all rising in April. The food index rose 0.2 percent after declining in March, with the food at home index increasing slightly. The index for energy increased 3.4 percent, with the gasoline index rising 8.1 percent, and the indexes for fuel oil and natural gas also advancing.

The index for all items less food and energy increased 0.2 percent in April. The shelter index rose 0.3 percent, as did the index for medical care, and the indexes for motor vehicle insurance, airline fares, recreation, and education increased as well. Several other component indexes increased slightly, including those for alcoholic beverages, tobacco, and personal care. In contrast, the indexes for household furnishings and operations, apparel, new vehicles, used cars and trucks, and communication all declined.

The all items index rose 1.1 percent for the 12 months ending April, a larger increase than the 0.9-percent increase for the 12 months ending March. The index for all items less food and energy rose 2.1 percent over the last 12 months, compared to a 2.2-percent rise for the 12 months ending March. The food index has risen 0.9 percent over the last 12 months, and the energy index has declined 8.9 percent. [More…]

Investing.com was looking for a 0.3% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.1% for Headline and 2.1% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

Headline and Core CPI since 2000

The next chart shows both series since 1957, which was the first time the government began tracking Core Inflation.

Headline and Core CPI

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is above the PCE target range of 2 percent.