Consumer Prices Spike Up on Energy Costs

[UpInArms]

http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=4403009

WASHINGTON (Reuters) - A sharp rise in energy costs pushed U.S. consumer prices up at their fastest pace in nearly a year last month, but underlying price pressures remained muted, a government report showed on Friday.

The consumer price index, the most widely used gauge of U.S. inflation, climbed 0.5 percent in January after a 0.2 percent rise the month before, the Labor Department said.

<snip>

Much of the increase in consumer prices in January was due to a big jump in energy costs, which were up 4.7 percent last month - the biggest increase since March.

Gasoline prices rose 8.1 percent, the largest jump since last February, while fuel oil spiked 7.2 percent and natural gas prices increased 3.8 percent.

...more...

[teryang]

1. This report is simply not credible

Housing costs in my area have been going up over ten percent a year for the past three years.

Medical costs and insurance costs are skyrocketing with the non-regulating free marketers in office having declared a free for all on the American consumer.

College tuition costs have been increased over 7 percent this year. Costs associated with high school and middle school education for services that used to be free are now born by the parents.

Who doesn't use energy? Who doesn't eat? Does anyone really expect energy prices to go down?

State and local taxes-going up about 2 percent a year but with the inflation of property values, the real increase is about 11 percent here.

The cost of labor is going down.

What we have is stag-flation.

[sendero]

5. plus...

... energy costs are a component of almost everything we consume, manufacture or transport. This increase in energy prices will definitely ripple through the economy in the coming months.

Energy prices are just one of many things that could stuttle our weak "recovery" in a hurry.

[ProfessorGAC]

12. That's The Theoretical Explanation. . .

. . .for not including the price of energy in CPI. The thought is that the inflation rate is already accounted in the increase cost of production of goods and services, so to count energy is double dipping.

That may have been true in 1930, but it's not anymore. The ability to differentiate the direct purchase energy consumption (gasoline, natural gas to homes and multiple residence buildings, consumer electrical) is far superior to what it was 70 years ago.

So, that "theory" is basically debunked. The cost of direct energy consumption should be part of CPI and it would not be double counting of costs. That's the reason why published inflation values are always lower than they really are. Those of us who believe that antiquated economic principles have no place in economic monitoring are at odds from the economist sluts who publish these data.

Also, housing was always, again due to anitquated hypotheses, to be a constant, since that spending is 100% discretionary. Nobody HAS to move into a larger home, so goes the principle. However, the effect of housing costs and payments due to escrow increases and the like, when all housing values double in 9 years, do create upward pressure on cost of living. To not include this is, to my mind, an inaccurate capturing of the reality in the economic numbers.

But, there is hope. The economic community is now about 50:50 split on these issues. So, the antique approach should eventually (although not fast enough for me) wither and die.
The Professor

[teryang]

6. State and local taxes

Apparently, there is a three percent valuation cap on property taxes, so with the two percent annual increase in rates, the 11 percent increase doesn't take its real toll until you try to move.

If you move and buy your own home or rent a new property the full impact of the eleven percent annual increase hits you all at once, resulting in an effective increased tax cost of up to 50 percent or more in one year. If your own your home the amount of increase depends on how long its been since your last move. This is why there is a great disparity between rents in newer and older apartment units. All the newer units call themselves luxury units to sugar coat the bitter pill.

[loudnclear]

10. It's the "inflation" that Greenspan ignores to help Bush

When people finally realize that those tax cuts REALLY were for the wealthy and not for most of us, they will come to thier senses. Most would gladly pay taxes with a good job, and reasonable costs for the necessities of life, good schools, and access to affordable medical care.

[RedEarth]

2. Could be going up some more over the next several months

OPEC has announced a cut production to take effect this spring and the price of oil has already gone up in anticipation of the cut. So will the Fed raise rates now when the economy is still soft? For some reason I recall this admin stating before the invasion of Iraq that the price of oil would come down once Saddam was removed from power.....guess not.

[Roon]

Why would OPEC cut production?

When doing so would hurt this country?

[UpInArms]

7. here's info on OPEC cut

http://www.forbes.com/home_asia/newswire/2004/02/18/rtr1265245.html

The Organisation of the Petroleum Exporting Countries at a meeting in Algiers last week agreed to cut supply limits by one million barrels per day (bpd) to 23.5 million bpd from April to counter a seasonal second quarter decline in fuel demand.

OPEC, which controls half the world's oil exports, also said it would act immediately to cut 1.5 million bpd of over-production by its members above existing quota limits.

But traders say OPEC's biggest producers so far have yet to abide by the deal, leaving actual supplies unchanged for sales in March.

[Roon]

11. thanks!

appreciate that..

[NickB79]

13. In a nutshell

If I'm remembering what was said here correctly:

The poor economy and massive deficits the US has racked up have caused the US dollar to plunge in value overseas. Since oil is priced internationally in US dollars, OPEC is losing millions daily because of this devaluation in comparison to the Euro. Cutting production is simply a way to increase prices to cover their losses. Even if OPEC earns $5 more per barrel of oil, in actuality they aren't making any greater profit because the increased money they bring in is of lesser value than it was several years ago. They're not doing this blatantly to hurt the US; they're a business who has to maintain income. If the US is hurt, that's just a bonus.

[dusty64]

3. I no longer trust

ANYTHING the government reports. Costs have been rising over the last three years, yet inflation is low? Its amazing how our regime has managed to squash ALL dissent and every aspect of government. Nothing they say can be believed and one must be skeptical of EVERYTHING!

[Pale Blue Dot]

4. They know that inflation is the key.

This whole economy will collapse if inflation begins in earnest. They know that, and they know that the smart investors know that.

Seriously, I would start stocking up on canned goods.

[LeftHander]

8. Winter.....duh...

eom

[Pale Blue Dot]

9. It's seasonaly adjusted, LeftHander

It was winter last year, too.