May 2018 Consumer Price Index

Consumers are paying more for goods and services according to the Bureau of Labor Statistics’ Consumer Price Index (CPI).  In May 2018, this measure of inflation rose 0.2 percent for a second consecutive period .  Compared to a year earlier, CPI gained 2.8 percent, increasing at the fastest pace in six years.

Energy costs are leading the headline tally’s trend.  During the past 12 months, energy costs have surged 11.7 percent.  Drilling deeper into the report, energy related commodities are up a combined 21.7 percent.  More specifically, gasoline is 21.8 percent higher, and fuel oil costs gained 25.3 percent from a year ago.  Energy services prices have been much steadier with electricity gaining 1.0 percent, and utility (piped) gas services falling 0.8 percent.

Along with energy, food is considered a more volatile component.  However, the past year has been rather tame on eating related prices, rising just 1.2 percent.  Food’s overall gain is being held back by food at home which rose 0.1 percent since the same period in 2017, while food away from home jumped 2.7 percent.

Core-CPI, which excludes food and energy, is still running a bit hotter than in recent history.  On a year-over-year basis, this stripped-down version of CPI is still 2.2 percent higher than a year ago.  Services are getting costlier, rising 3.0 percent.  Shelter rose 3.5 percent, and transportation services jumped 3.8 percent.  Medical care commodities and related services gained 2.7 percent and medical care services gained 2.3 percent. 

As you can see, there are pockets of accelerating inflation per core-CPI data.  Fortunately, core-CPI is not the Federal Reserve’s preferred price proxy.  Instead, they use the core version of the personal consumption price index which is released each month in the income and outlays report from the Bureau of Economic Analysis, and that year-over-year measure is up 1.8 percent.  The real take away from various measures of inflation is that the trend is upward sloping and showing early signs of acceleration.  Atlas will continue monitoring these and other indicators for further evidence of hastening price increases since this historically tends to lead to ever-higher interest rates.