Economists React: Seasonal Adjustment Subdues Gas Prices
WSJ ECONOMICS BLOG
Economists and others weigh in on the 0.2% rise in consumer prices, and the slower than expected 0.1% jump in core prices which exclude food and energy costs.
# The core was held down by a 1.9% drop in lodging costs (third straight drop as vacation spending slows), a 0.2% fall in auto prices (expect more as auto sales tank) and a 0.1% dip in recreation. Apparel rebounded by 0.5% but this followed a 1.3% March drop. The headline was boosted by a 0.9% leap in food prices, with gains in most sectors, while gasoline prices fell 2.0%. Unadjusted gas prices rose but by less than usual in April; May will be worse. But the big story here is core, still 2.3% year-to-year but the 3-month annualized is a mere 1.2%. Recessions do that. –Ian Shepherdson, High Frequency Economics
# Using an overly aggressive seasonal adjustment factor, the statistical magicians turned an actual 6.5% surge in gasoline prices into a small decline. I wonder if they can read the minds of very skeptical American motorists who are not fooled by this statistical sleight of hand! And like any good magician, the statisticians will make higher gasoline prices reappear with a vengeance over the summer months as the statistical magic trick runs in reverse making reported gasoline prices magically increase while prices at the pump decrease. –PNC
# There were a number of significant surprises. The energy category was 0.0% in April, right in line with expectations. As highlighted in our Preview of the report, although gasoline prices rose over the course of the month, the advance was in line with the seasonal norm. Based on current quotes, we should see about a 3% or 4% rise in the gasoline category in May, which should add a little more than 0.1 percentage point to the headline CPI. The 0.9% jump in the food category was the sharpest rise in more than 18 years. –David Greenlaw, Morgan Stanley
# While we look for more strong food price readings in the months ahead, we believe this elevated growth rate is unlikely to be sustained. –Zach Pandl, Lehman Brothers
# This is the third consecutive month in which inflation has shown no signs of acceleration. It's getting progressively harder to ignore the fact that, while the Fed seems concerned about price risk, the CPI numbers simply do not show any acceleration in inflation. Energy-based inflation was surprisingly subdued in this morning's release, particularly given the sharp increase in oil and gasoline prices we've seen. –Guy LeBas, Janney Montgomery Scott
# With the 0.1% increase in April, the core CPI has advanced at the slowest 3-month rate since December 2003 and is a welcome indication that soaring food and energy prices are not indicative of a generalized increase in all prices. In an economy teetering on the brink of recession, it is unlikely that many vendors will be able to raise prices faster. This illustrates the important truth about inflation — namely that prices of all goods move unevenly through time, so the underlying trend emerges only slowly over a period of several months. –David Resler, Nomura Securities |
