–Processed Food Markups Continue to Lead Consumer Inflation, Pushing Up CPI Annual Rate by Close to 2 Percentage Points
–Total CPI Annual Rate Steady at 3.2% after Hitting 41-Year High of 4.4% in January
–Narrow CPI (Ex-Fresh Food, Energy) Annual Rate Rises to Fresh 41-Year High of 4.0% from 3.8%
By Max Sato
(MaceNews) – Consumer inflation in Tokyo, the leading indicator of the national average, edged lower to 3.0% in July from 3.2% in June in the core CPI (excluding fresh food) and was steady at 3.2% in total CPI, as utility charges fell at a faster pace and the base effect of mobile phone price hikes a year earlier waned, data from the Ministry of Internal Affairs and Communications released Friday showed.
Amid continued markups in processed food and beverage prices, the core-core CPI (excluding fresh food and energy) annual rate rose to a fresh 41-year high of 4.0% in July from 3.8% in June.
The key points from the Tokyo CPI data:
* The core consumer price index (excluding fresh food) in the capital’s 23 wards rose 3.0% in June, coming in line with the median economist forecast of a 3.0% rise (forecasts ranged from 2.8% to 3.3%). It is the 23rd straight year-over-year rise after rising 3.2% in June, 3.1% in May, 3.5% in April, 3.2% in March, 3.3% in February and 4.3% in January.
* In January, the core CPI’s annual rate rose at the fastest pace in more than 41 years, since the 4.3% rise in May 1981, with or without the direct impact of the sales tax hikes in 2014 and 1997 and the introduction of the tax in April 1989. Even during the 12-month period of being boosted by a sharp sales tax hike to 8% from 5% in April 2014, the core CPI peaked at a 2.8% rise. The sales tax is currently at 10% after another rise in 2019.
* The prices of goods excluding fresh food rose 4.5% from a year earlier in July, pushing up the Tokyo area total CPI by 1.84 percentage points, with the pace of increase decelerating from 5.4% (a positive 2.20-point contribution) in May. The prices of services excluding owners’ equivalent rent gained 2.9% on the year, adding 1.03 point to the CPI, up from 2.4% (plus 0.84 point). The uptrend reflects moves among many firms to raise wages at a faster pace than in recent years to secure workers.
* The core-core CPI (excluding fresh food and energy) — a key indicator of the underlying trend of inflation — rose 4.0% on the year in July for the 16th straight rise. It was above the median forecast of a 3.8% rise. It followed increases of 3.8% in June, 3.9% in May, 3.8% in April, 3.4% in March, 3.1% in February and 3.0% in January. The 4.0% gain in July is the highest in 41 years, since the 4.2% rise in April 1982. This measure is not affected by fluctuations in energy prices but it has been on an uptrend in the face of markups in processed food and durable goods.
* The total CPI gained 3.2% on year in July, marking the 23rd straight year-over-year gain and coming in above the median forecast of a 2.9% rise (forecasts ranged from 2.8% to 3.2%). It followed increases of 3.2% in June and May, 3.5% in April, 3.3% in March, 3.4% in February and 4.4% in January. The 4.4% increase in January is the largest in more than 41 years, since the 4.8% gain in June 1981.
* Fresh food prices, a volatile factor, continued rising, up 7.0% on year in June, pushing up the overall index by 0.28 percentage point. The pace of increase accelerated from a 3.2% rise and a 0.13-point contribution the previous month.
* The prices for both fresh and processed food, ranging from fish, meat, eggs, soft drinks, and cooking oil to ice cream, buns and hamburgers, continued pushing consumer inflation higher from year-earlier levels as many firms have been raising prices to reflect higher costs.
* Food excluding perishables rose 9.0% on year (a 1.95-point contribution to the total CPI) in July, after rising 8.9% in June with a 1.92-point contribution. This category replaced energy as the largest contributor to the CPI increase in October 2022 (1.27 points vs. 1.20 points) and the gap between the two has widened further as energy prices have basically eased from last year’s high levels.
* Energy prices fell 11.9% on year in July, pushing down the total index by 0.69 percentage points, after falling 6.9% (minus 0.39 points) in June.
* In the energy category, gasoline prices rose 1.6% on the year, making a positive 0.01-point contribution to the total CPI in July, after falling 0.7% (zero contribution) in June. Electricity charges slumped 16.7% (minus 0.54 point) in July after dipping 10.9% (minus 0.34 point). The prices for natural gas supplied through pipelines fell 9.1% (minus 0.17 point) after falling 2.8% (minus 0.05 point) the previous month.
* The prices for household durable goods posted their 16th straight year-over-year increase in July, up 3.5% and pushing up the CPI by 0.04 point after rising 3.7% (plus 0.04 point) in June.
* A new factor behind the easing core CPI in July was mobile phone handset prices, which rose just 0.5% on year with zero contribution, down from a 19.3% increase in June, when it pushed up the index by 0.12 point. By contract, mobile phone communications fees rose 10.2% with a 0.10-point positive contribution, up from a 2.9% rise in June (plus 0.03 point).
* Accommodations costs rose 15.1% from a year earlier with a positive 0.18-point contribution in July, accelerating from a 5.5% rise (plus 0.06 point) in June, as pent-up demand for spending on services outpaced the downward effects of travel subsidies.