Thursday, June 16, 2011

Understanding Inflation

The inflation figures for May came out yesterday, and they weren't much of a surprise: Prices continued on a slow upward trajectory. The consumer price index now sits at 3.6 percent over the past 12 months, up from April's figure of 3.2 percent. One item that is no longer causing the inflation rate to jump is the price of gasoline: Nationwide, gas prices fell by 2 percent in May.

But food prices continued to rise, and they're now up 3.5 percent over a year ago. Core CPI, which strips out gas and food prices, was also up 1.5 percent in year-over-year figures, after being up 1.2 percent in April. It was the highest one-month rise in that figure since July 2008.

Even though the inflation rate is growing, it still seems somewhat small next to the everyday price increases we've been seeing. For instance, despite the fact that it's been dropping back to earth lately, gasoline is up around 40 percent from its price this time last year. So how is the overall inflation rate still just 3.6 percent? We'll explain all of that in a special report on inflation that will be posted to the Echelon Wealth Strategies Web site in the next couple of days.

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