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Latest CPI numbers show slight increase in inflation, but price level is still lower than last year


AP: Prices are still lower than a year ago. 

The Bureau of Labor Statistics released the September CPI figures today. The CPI, or consumer price index, is a widely-used measure of inflation. Latest CPI figures show that prices rose 0.2 percent in September, which is less that the 0.4 percent increase in August. From September 2008 to September 2009, the CPI has fallen 1.3 percent.

Prices in industries such as hotel/motel lodging, new and used vehicles, medical care, and public transportation all contributed to the increase in the CPI. Other industries, such as housing and energy, are still experiencing a decline in prices. The drop in energy prices is an extremely large 21.6 percent. Prices in the food industry have declined for 12 straight months, which is a phenomena that hasn't been seen for 40 years.

What this means for consumers

Today's announcement shows that, while the CPI inched up slightly in September, inflation is not a problem for consumers yet. Overall, since last year, the price level has fallen, which causes deflation instead of inflation.

In addition to being able to pay lower prices at the cash register, the deflation will also affect social security benefits. The CPI-W, which is the CPI for urban wage earners, is used to calculate the social security cost of living adjustment, or COLA. The goal of a COLA is to prevent the purchasing power of the social security payment from being eroded by inflation. Since we have had deflation rather than inflation, the purchasing power of social security payments have not been eroded. This will be the first year that social security recipients will not receive a COLA since it was introduced in 1975.