On Friday, August 13th, the Bureau of Labor Statistics (BLS) released the July 2010 Midwest Consumer Price Index.
The national CPI reported the All Items index (not seasonally adjusted) increased by 1.2% from July 2009 and was flat from June 2010. The Midwest CPI (not seasonally adjusted) increased by 1.7% from July 2009 and increased by 0.2% from June 2010.
All Items less food and energy index (Core, a less volatile index) increased by 0.9% from July 2009 and was flat from June 2010. The Midwest Core index Core index increased by 1.0% since July 2009 and was flat from June 2009.
The Midwest All Items index and Core index are showing a little more inflation than the national level CPI. However, both are trending lower. 2009 was the first year inflation was below 0% (at -0.4%), since 1955 when it also reached -0.4%. Most of the CPI’s decline last year was due to the decline in the first half of the year.
The Chicago-Gary-Kenosha region of the Midwest CPI increased by 0.8% from July 2009 and increased by 0.2% from June 2010. The Core index reported -0.1% from June 2010 and -0.2% since July 2009.
The BLS defines the counties of The Chicago-Gary-Kenosha region as “Cook, DeKalb, DuPage, Grundy, Kane, Kankakee, Kendall, Lake, McHenry, and Will Counties in Illinois; Lake and Porter Counties in Indiana; and Kenosha County in Wisconsin.” Of the six regions within the Midwest, the Chicago-Gary-Kenosha region is the only region to be computed on a monthly basis.
The Acting Regional Commissioner of the BLS, Charlene Pfeiffer noted “that the indexes for food (0.3 percent) and energy (2.2 percent) rose in July.” Since July 2009, most components of the Chicago-Gary-Kenosha region have increased with the exception of housing, apparel and recreation falling by 0.1%, 5.0% and 1.9% respectively. The largest subset of housing to fall was Household Furnishings and Operations by 6.2%.
The largest component increases for the region include: energy 11.3%, medical care 4.8% and transportation 4.5%. Rent of primary residences increased by 1.2% since July 2009. As noted in the recent "Cook County Rent and Vacancy 2010 Q1 Report" released by DePaul University's Institute for Housing Studies, rental pricing has decreased since 2007 and vacancy rates have increased.
Within energy, the components leading to the large increase are electricity 15.8%, utility (piped) gas service 15.1% and all types of gasoline at 7.6%.
Since July 2007, the region’s Core index is trending down when measured on a 12 month rate of change. From July 2007 to July 2008 the index ranged from 2% to 3%. From July 2008 to July 2010 the annual rate of change has ranged from 2% to -0.3% (reached in June 2010).
With the U.S. economy currently finding a soft spot, the recent discussion by economists has turned from inflation fears to deflation fears. If the economy maintains slow growth, the probability for high inflation is relatively low. However there can be special cases causing some components to increase such as the current rally in grain markets due to a surprising decrease in global supply. The Fed wants to avoid deflation as that could cause wages to eventually decrease, the cost of debt to increase, increased layoffs and would result in other lasting behavioral issues.
The August 2010 Chicago CPI is scheduled for a Sept 17th release.
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