The monthly Consumer Price Index (CPI) Inflation data for April was released this morning, at the same time as the weekly unemployment claims report was released. The data was received fairly well. The non-seasonally adjusted "all-items" CPI-U was reported at 2.5% and the all-items excluding food and energy was reported at 2.1%. This column has written numerous articles on the CPI data. The trend has been that we have been seeing service inflation and commodity deflation. We have also been seeing medical service inflation and shelter inflation. What happened this month?
The biggest Increases April to April were Transportation Services, Hospital Related Services, Shelter, and other Services. These other services were Water, Sewer and Trash Services, Medical Care Services, Personal Care Services, and Recreation Services. There commodity deflation for Household furnishings, Transportation commodities, Recreation commodities, and education and communication commodities.
Seasonal Weighting is skewing the data. The weighting on Food, Shelter, Water, Sewer, and Trash Services, Recreation Services, and Education and Communication Services were all posted with lower seasonal adjustments that April 2017. If the same weighting was used this April as was used last April then the inflation rate would be 2.47%. This is close enough t the reported 2.5% that it is fine. Shelter and Energy inflation was the largest total dollar amount this year.
Inflation is present. Inflation is Okay. This column has produced an article that displayed how we could have higher inflation that the inflation rate could be over 3%, and possibly over 4%, and it would be okay. There is a conception called the Misery Index where the unemployment rate is added to the rate of inflation. The official unemployment rate is under 4%. The misery index would be under 7%. This is significantly lower than it has been. The article "A Scattered Economy" showed a scatter plot of Inflation versus unemployment. to illustrate this point. We have inflation lower this April than April 2005, April 2006, April 2008, April 2010, and April 2011. At least we aren't having deflation as we did during April 2009 and April 2015. At least we don't have inflation over 4%, 8%, or 12% as we did during the early 1980s.
It's the economy.
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