Here’s something that only got minor play this week: CPI data for December, and the full year were released, and it waren’t purty:
For 2005, inflation rose at the fastest rate since 2,000 — while Personal Income gains failed to keep pace with price increases.
I’d like to see someone try to spin that positively.
CPI rose 3.4% for the year, despite Consumer Prices declining 0.1% in December, and 0.6% in November. AP noted that this "represented
the first consecutive monthly declines in two years, but both months
were heavily influenced by declines in gasoline and other fuels that
are expected to be reversed in January."
For the full year 2005, Energy prices were up 17.1%, followed by Medical Costs up 4.3%, Housing Prices up 4% and Education 2.4%.
All kinds of Energy went up in price: Gasoline prices were up 16.1 percent, Natural Gas prices jumped by 30.2 percent, and Home Heating Oil was up 27.2 percent. These are huge increases being felt by consumers in their higher heating bills, just about . . . NOW.
This data makes me wonder: Why do some economists insist on focusing on the core rate? Because volatile food and energy can throw the data off for a month? With inflation up 3.3% in 2004, and plus 3.4% in 2005, remind me again why we insist on ignoring food and energy?
That makes little sense after 2 consecutive years of significant, broad price increases.
What’s the Fed have to say about this?
Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, stated: "I think it is too soon to declare that the ‘pass-through risk’ is entirely behind us."
Consumer Price Index Up 3.4 Pct. in 2005
AP, Wednesday, January 18, 2006
Inflation Hit Five-Year High of 3.4% Last Year
Wages Didn’t Keep Up, Labor Department Says
Washington Post, Thursday, January 19, 2006; Page D01