Lower Energy Prices Lead to Fall in CPI in August

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September 16, 2008 (Prices Byte)

Lower Energy Prices Lead to Fall in CPI in August

Prices Byte by Dean Baker

For Immediate Release: September 16, 2008
Contact: Alan Barber, (202) 293-5380 x115

"Core inflation, excluding OER, has risen at a 4.1 percent annual rate over the quarter."

The overall CPI fell 0.1 percent in August, driven by a 3.1 percent decline in energy prices. The core index increased at 0.2 percent, bringing the annual rate of increase in the core over the last quarter to 3.4 percent. This is almost a full percentage point higher than the 2.5 percent core inflation rate over the last year. The overall CPI has increased at a 7.2 percent rate over the last quarter, up from a 5.4 percent increase over the last year.

Apart from the good news on energy prices, the rest of the inflation picture is mixed. Food prices jumped 0.6 percent in August, bringing their annual rate of increase over the quarter to 9.6 percent, up from a 6.1 percent rate over last year.

Core inflation continues to be held down by the glut of housing, which is containing rental inflation. Owners’ equivalent rent (OER) rose by just 0.1 percent for the second consecutive month. It has risen at just a 2.1 percent annual rate over the last quarter. The rent proper index, which includes utilities, rose at a 0.3 percent rate for the second consecutive month.

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