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CPI Rate Still Unbelievable

Wednesday, 17 August 2005 12:00 AM

1.  CPI Rate Still Unbelievable

If you can believe the latest government statistics, the housing market may be showing some cracks – and inflation is still very low despite a huge run-up in oil prices.

According to data released Tuesday morning, the annual rate of inflation rose to 3.2% in the twelve months to July, following a 2.5% gain in the year to June.
 
Credit this to rising energy costs. But the "core" annualized rate – which excludes energy – rose from 2 to 2.1% in July.
 
With oil costs up more than 100% in the past 15 months, we still find it difficult to believe that both CPI and the core rate show such little impact from this.
 
In MoneyNews' Financial Intelligence Report "The Inflation Lie", editor Jarret Wollstein details why he believes the core rate is much higher – likely 5 to 6%. [For more info on this report, Go Here Now]
 
FIR argues that the government manipulates the CPI rate, making it artificially low. In doing so, the government keeps many costs in check, including its own incremental budget increases and entitlement spending.
 
But the flipside is that the value of the dollar is eviscerated by the real inflation rate. The telltale signs of the inflation manipulation are the devaluation of the dollar (which is down by 50% over the past five years) and the rise in commodity prices – most of which have skyrocketed in recent years – oil being just one example.
 
According to a separate report, housing starts in July ran at a 2.042 million pace, down slightly from June's 2.045 million starts.
 
Is it an indicator that the housing boom is over?
 
Though we see a bust on the horizon, we believe long-term rates still rule they day. They remain low and the boom continues.
 
But the slight decline in housing starts may be a sign that the Fed's increase in short-term rates is finally affecting the "froth" in the housing market.
 
Only time will tell.

According to data released Tuesday morning, the annual rate of inflation rose to 3.2% in the twelve months to July, following a 2.5% gain in the year to June.

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1.  CPI Rate Still UnbelievableIf you can believe the latest government statistics, the housing market may be showing some cracks - and inflation is still very low despite a huge run-up in oil prices. According to data released Tuesday morning, the annual rate of inflation...
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Wednesday, 17 August 2005 12:00 AM
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