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Cromford Report – September 2015

The inflation situation has been very interesting over the past year. The Consumer Price Index for July 2015 was 238.654 and that for July 2014 was 238.250. This means that the all item index only changed by 0.17% over the past 12 months. Inflation is rarely this low. In addition it was negative for the period January through May 2015.

The extremely low inflation numbers are partly caused by the drastic fall in oil and gas prices since last year. Gasoline is down 22.3%, while fuel oil for household heating is down 24.0%. Used cars and trucks are also down, as are most transportation costs. Most apparel is less expensive now than last year too, which is probably due to the strength of the dollar versus the currencies of the countries which make most of the apparel for sale in the USA. Communication costs fell sharply, down 3.1%

Of course medical costs continue to rise, hospital charges up 3.2% for example, and education costs are still rising too, particularly books and supplies.

One of the largest rises was for rental shelter – up 3.1%. We are seeing even steeper rises in rental costs in Phoenix than the nation as a whole, 7% when we last checked.

If we take energy costs out of the equation, then inflation becomes 1.8%. This is pretty close to the Federal Reserve’s ideal of 2%.

Cromford September 2015