CPI Data: Where is the Credibility?

by Lee Adler, The Wall Street Examiner

There’s something very fishy about the July CPI data. The BLS reported that the July headline number was flat versus June. That was significant because pundits concluded that this would give the Fed room to do more QE. Supposedly contributing to the decline was a 0.3% decline in energy prices.

U.S. Information Agency Weekly Average Retail Gas Price – Click to Enlarge.

That caught my eye. “Wait a minute!” I thought. I drive a car and I distinctly remember gas prices being low late in the spring, and going up ever since. So to test my memory I went to the US Energy Administration website to get a reading on real time gas prices. Sure enough, my memory was correct. Gas prices had risen by 4% over the course of the month. That’s not 4% annualized. It’s 4% for the month of July alone. I don’t know whether this was just a matter of the date when the July CPI data was collected or something else, but the fact is what it is. Energy prices, as measured by the national mean retail price  retail price were up by about 4% in July.

And it has not gotten any better in August. From July 30 through August 13 the national average retail price per gallon rose from 3.568 to 3.779, a gain of 5.9% in 2 weeks. So regardless of whether this is just a matter of the CPI data having been collected in early July reflecting a June decline, or something else, the data is no longer relevant. It’s old news.  The pundits are wrong as usual. This is not an excuse for the Fed to do more QE.

If the energy component was that misleading, I have to wonder if the other components weren’t off by just as much.  I don’t know about you, but I ain’t buying it! And judging by the 70 basis point jump in Treasury yields today, neither are bond investors.

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About The Author

Lee Adler is the editor and publisher of The Wall Street Examiner, host of Radio Free Wall Street, and moderator of the Wall Street Examiner Forums and Bears Chat, and the Stool Pigeons Wire – Capitalstool.com.