By Denny Gulino
WASHINGTON (MaceNews) – While not dramatically decelerating, two main measures of U.S. inflation are registering a surprising pause in their acceleration that is coupled to anecdotal reports of renewed widespread price cuts.
Thursday’s Consumer Price Index for August, up 0.2%, showed an annual rate after seasonal adjustment of 2.7% – despite the month’s upward spike in energy prices – and the core rate 2.2%. The “all-items” annual rate was the lowest since April. The consumer inflation rate through both June and July had been 2.9%.
Wednesday’s Producer Price Index, slipping 0.1% overall, was riddled with minus signs, particularly at earlier stages in the supply pipeline, and its annual rate of change through August was 2.8%, like the CPI, also the lowest since April. June’s business inflation rate had been 3.4% and July’s 3.3%.
The PPI, though often mistakenly called a “wholesale” prices measure, actually contains many retail categories though all seen from the perspective of the seller, not the ultimate consumer.
Both of the price-change series of the Bureau of Labor Statistics are still running ahead of the gauge of inflation favored by the Federal Reserve, the Commerce Department’s tally of Personal Consumption Expenditures – not so heavily influenced by housing prices as the CPI. Yet the directional trends if not the levels of all three generally are in concert over time.
Both the underlying cross currents for prices evident in both the CPI and PPI show a mixture of short-term and longer-term price trends that make it hard to see the forest for the trees, their overall deceleration has been accompanied by many anecdotal reports of price cuts that seem to be spreading in September.
In the past week there have been noted a nearly 50% cut in the price of a leading model of the most expensive vacuum cleaner line, an approximately 40% decline in some expensive auto parts assemblies, sizable drops in the cost of propane and, because of Apple’s latest new-product announcements, an across-the-board price cut for older model smartphones and watches.
The CPI’s bulwark against deflation, its measures of shelter-related prices, continue to be elevated compared to past years after the Great Recession, which makes the latest overall deceleration in inflation rates even more noteworthy. While housing contributes less to GDP while industry prices both benefit and in some areas suffer from supply constraints, it is firmly propping up inflation rates even while the breadth of price increases throughout the economy seemingly has begun to narrow since April.