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Economic Indicator: Consumer Price Index: Inflation

Consumer Prices rise as the cost of living in the U.S. goes up as projected in October.

By: Alan Gutierrez, October 31, 2013

 According to the latest Consumer Price Index Report The CPI increased 0.2 percent, matching the median forecast of 86 economists surveyed by Bloomberg, after rising 0.1 percent the prior month, Labor Department data showed today in Washington. Stripping out volatile food and fuel, the so-called  core measure climbed 0.1 percent for a second month, less than projected.

Food: As commodities costs rise, some companies are taking steps to regain pricing power sapped during the recession. McDonald’s, the world’s largest restaurant chain, is introducing products onto its Dollar Menu that cost $2 versus $1.

According to McDonald’s CEO Don Thompson he states during an Oct. 21 conference call “While abandoning the low-cost menu is not “part of our affordability strategy, particularly not at a time like this,” adding products at double the price “is one of the ways that we can maintain the Dollar Menu in the face of rising commodities and labor pressures.”

The CPI report states that the food index was unchanged in September after rising in each of the three previous months. The index for food at home was unchanged, as declines in the indexes for fruits and vegetables and nonalcoholic beverages offset advances in the other major grocery store food group indexes.

 

Energy: The Labor Department which stated on Oct 23^rd “The cost of goods imported into the U.S. rose in September, reflecting higher fuel charges. The import-price gauge climbed 0.2 percent for a second month.”

 

The report states that the energy index rose 0.8 percent in September after declining in August. All the major energy component indexes increased in September. The gasoline index, which declined slightly in August, rose 0.8 percent.

 

All items less food and energy: The CPI report as of October, 30 2013 also suggested the estimated monthly payment for retired workers receiving Social Security benefits will rise 1.5 percent in 2014. It’s up to the Social Security Adminstration to issue the official figures based on the data.

 

Within wage earnings the CPI report did have some positive results because Hourly earnings adjusted for inflation were unchanged last month after a 0.2 percent increase in August. Earnings were up 0.9 percent during the past year.

The index for all items less food and energy increased 1.7 percent for the 12 months ending September, a slightly smaller increase than the 1.8 percent figure for the 12 months ending August. Several components have exhibited very modest increases over the past 12 months, including apparel (0.8 percent), airline fares (0.8 percent), used cars and trucks (0.4 percent), and recreation (0.2 percent). The shelter index rose 0.2 percent for the fourth month in a row. The indexes for rent and owners’ equivalent rent both rose 0.2 percent while the index for lodging away from home fell 0.4 percent. The medical care index increased 0.3 percent in September after rising 0.6 percent in August.

 

Massive Inflation:

 

With inflation running below the Fed’s goal, the central bank has more flexibility to maintain its $85 billion-a-month bond buying program. So Faced with the fact that the Fed can never stop Quantitative Easing (QE). When the Fed is forced to stop their strategy of QE it will be hard to go cold-turkey. For seniors or anyone that is retired and on SS or you live on fixed income, every time you shop at a supermarket your buck buys less and less. We might be entering an era of economic Armageddon with massive inflation because despite the theory that gold has no more intrinsic value than $100 Federal Reserve notes, I think that when this is all over it will still buy whatever food and fuel remains in the ground that is left for the consumers.

 

 

 

References:

http://www.bloomberg.com/news/2013-10-30/consumer-prices-in-u-s-rise-as-forecast-on-gain-in-fuel-costs.html

http://www.bls.gov/news.release/cpi.nr0.htm