U.S. prices drop in June

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"U.S. prices drop in June
CBC News

The U.S. consumer price index fell for the first time in a year in June, thanks mainly to slumping gasoline prices, according to new figures released Friday.

U.S. CPI decreased 0.2 compared to May. The American inflation rate was up 3.6 per cent in June, the U.S. Department of Commerce said in a press release.

The main reason for the appearance of deflation in the U.S. economy in June was slipping gas prices, off 6.8 per cent in the month. That decrease represented an acceleration from May, when pump prices fell a further two per cent.

For the latest 12 months, however, gasoline prices have gained 35 per cent.

Core rate

The ups and downs of energy prices is one reason why governments calculate so-called "core inflation".

Indeed, once you subtracted out the price movements of historically volatile commodities like oil and food, the June CPI gained 0.3 per cent, the government said.

"While this decrease was the major factor in the seasonally adjusted decline in the all items index, the index for household energy declined as well. In contrast, the index for all items less food and energy increased 0.3 percent," the Commerce department said.

For its part, food prices posted their smallest rise in June since January, up 0.2 per cent in the sixth month of the year.

The June gain in the United States equaled May's 0.3 per cent upward movement in prices.

For the past twelve months, however, the core CPI has only risen 1.6 per cent comparing June 2011 to June 2010. The yearly gain in prices is considered to be minimal.
Canada's situation

By contrast, Canada's CPI for May — the latest month available — rose 0.7 per cent over April and 3.7 per cent versus May 2010. The national rate was considered relatively high since it was higher than the CPI range of one to three per cent considered acceptable by the Bank of Canada.

Canada's core inflation for May, however, generally mimicked the U.S. situation.

Canada's CPI — subtracting out energy and food — was up 0.5 per cent compared to April and up 1.8 per cent compared to May 2010.

In the United States, May's non-energy and food CPI stood at 0.3 per cent versus April. Comparing May 2011 to May 2010, the national core CPI rose by 1.5 per cent."