by Mark Silva
Eat up:
The price for food at home, which had grown by nearly one percent in January, rose by just 0.3 percent in February, the government says today -- citing a "deceleration'' in inflation from an overall 0.4 percent increase in the Consumer Price Index in January to just 0.3 percent in February.
Feel better already?
The CPI still is 4 percent higher than it was a year ago in February. According to the Bureau of Labor Statistics:
"The Consumer Price Index for All Urban Consumers increased 0.3 percent in February before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The February level of 211.693 was 4.0 percent higher than in February 2007.
"On a seasonally adjusted basis, the CPI-U was virtually unchanged in February, following a 0.4 percent rise in January. Each of the three groups--food, energy, and all items less food and energy--contributed to the deceleration.
"The index for food at home, which rose 0.9 percent in January, increased 0.3 percent. The moderation reflected a downturn in the indexes for fruits and vegetables, for meats, poultry, fish, and eggs, and for nonalcoholic beverages.
"The index for energy turned down in February as a 1.9 percent decline in the index for energy commodities more than offset a 1.7 percent increase in the index for energy services. The index for all items less food and energy was virtually unchanged after increasing 0.3 percent in January. The deceleration reflects smaller increases in the indexes for shelter, for medical care, for recreation, for education and communication, and for other goods and services, and a decline in the index for apparel.
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Comments
Meltdown Update;
http://www.nytimes.com/2008/03/14/opinion/14krugman.html?_r=1&ref=opinion&oref=slogin
Posted by: C.Morris | March 14, 2008 9:27 AM
Time for Brucie, Johnny D and the rest of the right wing nutjobs to tell us how great the economy is!!
Posted by: BobHusseininATL | March 14, 2008 9:32 AM
Yeah,
Remember how all the wing nuts kept deriding Krugman and telling us how "fundamentally sound" the economy was? Looks like Krug nailed it on just about everything, unfortunately for us.
Posted by: d Hussein t | March 14, 2008 1:32 PM
The fact is the economy couldn't be better. Why just last week I bought my son and his fiance a second home in the Hamptons, even had them put an Infinity G in the garage. It's a buyer's market and I look forward to summer in the Hamptons while I sip martinis and listen to liberals whine how life isn't fair. I'm rich, and you're not. You want some of this life, come and get it!!! I'm sick of paying for you people to suck on big governments teet and watching you rob me with your rediculous and unfair taxes on my wealth.
Posted by: Baxter Hartwick IV | March 14, 2008 1:36 PM
Baxter, ol boy, capital indeed! March on!
Sound the charge!
J. Buffington Foulfellow.
Posted by: J.Buffington Foulfellow | March 14, 2008 6:12 PM
This is a case of liars figuring.
The CPI tells us nothing directly about inflation other than its possible effect. Higher prices constitute a symptom of inflation, and not inflation itself. Inflation is, essentially, having more money in a market than justified by the total value of goods and services traded. Having too much money means there is less demand for it and, therefore, more of it is required in exchange. That, in turn, is reflected in higher prices.
Inflation, however, is not the sole cause of higher prices. Higher prices can also be caused by a smaller supply of a given commodity, in which case there is a greater competition for the commodity’s allocation. Competition for a scarce resource is conducted by offering more money for its allocation – which also results in higher prices.
If you want to see tell the difference between inflation versus scarcity as the reason for high prices, a better indicator is the value of the currency when traded with other currencies or in exchange for precious metals. Thus, if prices go up but the exchange rate stays the same on average, then it is more likely the case that scarcity, rather than, inflation is driving the prices up.
What the government also fails to say is that the effect of inflation is not felt all at once. Rising prices resulting from inflation can occur over a period of time because it takes time for inflation to generate that reaction in the market. People who get the first use of inflated money – such as the government, banks and corporations – get to use it as though it has full value. It is only after the money has been used as an exchange commodity that the market detects an excess of currency and demands more of it to pay for goods and services. In other words, its the workers and savers who get the secondary and tertiary use of money that suffer from its relative decrease in value.
It is clear that higher prices we see today are, in large part, due to inflation rather than scarcity. We can see this from the fact the Dollar has consistently dropped in value against other currencies. Last March, the exchange rate for the Euro in Dollars was about $1.32. It’s $1.56 today. The same is true of precious metals. In March of 2007, gold sold for between $545 and $585 an ounce. Today, it’s high was $1,008 an ounce. In short, the indicators show a substantially decrease in value in the Dollar, rather than an increase in value of the goods.
Which brings me back to my original point. It is false to say that inflation is slowing because there has been only a small increase in the CPI. There is no way for a short term slowdown in price increases to fully represent the nature and extent of the inflation. Harsher effects can cum upon us at a later time because of the necessary “trickle down” effect of inflation. In which case, the government has figures that do not lie, but they also have liars that have figured and spun these numbers in a false light.
Posted by: John W. | March 14, 2008 7:59 PM
John W.
Good one.
Posted by: C.Morris | March 14, 2008 9:01 PM