So, our prediction for May 2009 was a faster growth in the headline CPI in order the difference between the core and headline CPI to return to its long-term trend. Figure 1 demonstartes the most recent movements in the difference. We expect the headline CPI to grow faster in May 2009. Will watch today's announcement by the BLS.
Figure 1. The difference between the core and headline CPI. The next move is back to the trend - the headline CPI should be growing faster in May 2009.
So, new readings are published. For the seasonally adjusted CPI, there is not difference between the growth in the core and headline CPI (+0.1%). The difference in May is very close to that for April, as Figure 2 shows. As we discussed before in the lost blog, the last five years were charactrized by extremely high increase in the price index for energy in spring months. This affects seasonally adjusted values of the index for energy because even a modarate growth looks like a negative growth relative to higher figures in the previous years. In absolute terms, the distance between the new difference and the trend becomes shorter, however, becasue the trend is positive. So, the difference approaches the trend, but very slow.
Not seasonally adjusted (NSA) indices are likely providing a better view. Figure 3 shows that the difference between the (NSA) core and healine CPI had a peak in March and started its decrease.
In June , seasonally adjusted indices still will be affected by the previously observed growth in oil price, but from July 2009, the situation will reverse: the difference between May and June indices for energy during the past 5 years are as follows: 2004 +5; 2005 +2; 2006 +2; 2007 +2; 2008 +18. When averaged, ~+6.
Between April and May: 2004 +8; 2005 +1.5; 2006 +8.3; 2007 +12: 2008 +17; 2009 +5. When averaged ~+10.
Between June and July: 2004 -3; 2005 +7; 2006 +4; 2007 -4; 2008 +5. When averaged ~2. So, June-July will be the turning point in the difference (core -headline CPI) considering oil price growth.
Figure 2. The difference between the (SA) core and headline CPI. The reading for May 2009 is very close to that for April.Figure 3. The difference between the (NSA) core and headline CPI passed its local peak in March and accelerates to the trend shown in Figure 2.