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CPI report: Inflation takes a holiday

By Mark Hamrick ·
Wednesday, October 30, 2013
Posted: 10 am ET

One of the few benefits of our slowly growing U.S. economy? Inflation has been on vacation. That's not to say that some prices aren't rising, but overall, broadly measured inflation is virtually nonexistent, according to the September consumer price index released by the Labor Department. The main gauge of inflation at the retail level was up 0.2 percent. With that, we now know that Social Security recipients will get cost-of-living adjustments of 1.5 percent in their payments next year.

A day earlier, the government reported that wholesale prices fell 0.1 percent in September.

The down side

Most of us would probably celebrate that prices aren't rising. But it is a concern for the Federal Reserve, which is meeting this week. That's because it sees the low rate of inflation as stemming from a pretty weak economy. The Fed doesn't want inflation running at a brisk rate either because it erodes our standard of living and tends to hurt the performance of the stock market.

Brad Sorensen, director of market and sector analysis for Charles Schwab, says it is hard for companies to raise prices. "We have a pretty competitive environment," says Sorensen.

In a report released from IHS Global Insight, economist Michael Montgomery expects no inflation on the horizon, either. He said, "Food prices are easing, with the 2012 drought's effects starting to reverse as evidenced by falling beef prices. Everything else almost requires a microscope to find price gains -- yielding almost no price pressures -- a condition likely to persist for the rest of 2013."

Your results may vary

Of course, if you are paying for a college education, or health care, or a house in a hot market, you might think all of this no-inflation talk is a bunch of hooey. For example, the Standard & Poor's/Case-Shiller 20-city home-price index was up nearly 13 percent over the past year. Prices in Las Vegas, which was slammed by the housing crisis, were up 29 percent from a year ago.

But that's the problem with economic statistics. They are meant to cover a wide swath applied to just about everybody. In reality, they don't always reflect our personal experiences. Says Sorensen, "One number doesn't tell the whole story. It's a piece of the puzzle of the inflation story."

Have you been experiencing inflation or are you feeling a reprieve?

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1 Comment
August 17, 2014 at 2:20 pm

what is the cost of living %rate increase for 2014