By Lance Roberts of Streettalk Live
July 16, 2011
With Friday's release of the Consumer Price Index (CPI) we are able to also update our Composite Inflation Index to get a read on macro inflation and the potential impact to the economy.
First, let's go through the CPI report. Month-over-month headline CPI was negative for the first time in twelve months on the decline in energy costs. However, quick math with also tell us that the last time CPI was negative was in June of last year which was ALSO when the last Quantitative Easing program ended and the withdrawal of "heroin" from the system left addicted trades scrambling for the next fix. Last summer stocks and commodities slid sharply during the summer months until the pronouncement of QE 2 in late August. This year Bernanke is getting ahead of that curve with pre-announcements of QE 3.
Not surprising, however, is that once you exclude food and energy, CPI rose 0.3 percent, equaling the May rate and topping the consensus forecast for a 0.2 percent increase. In reality, the entire drop was in energy (down 4.4%) and gasoline (down 6.8%), as just about every other category increased in price. Food rose by a 0.2% gain after a 0.4% gain last month. Vehicles increased 0.6%, used cars and trucks jumped 1.6%, apparel increased 1.4% and home owners equivalent rent rose 0.2%.
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