The good news is that the Consumer Price Index is down — for the first time in almost a year. That means we are seeing lower prices and our dollars are going further. This is generally good news, especially if it is accompanied by a robust economy and productivity that empowers people to buy more with less. However, if caused by a lower demand for goods and services, it can spell trouble for the economy. It is too early to say which is the case yet, because most were surprised by the drop.
Issues that could contribute to such:
- The stock market’s dangerous volatility
- The President’s tariff and protectionism policies, making every business decision maker worried about the future, financially
- Very low unemployment, which lends to the idea of this being driven by greater productivity, and thus a positive.
We obtained a statement from Rosenthal Wealth Management on this:
“The Bureau of Labor Statistics (BLS) today reported that The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in March on a seasonally adjusted basis following a 0.2 percent rise in February. Over the last 12 months, the all items index rose 2.4 percent before seasonal adjustment. Larry Rosenthal, Chief Financial Officer of Rosenthal Wealth Management, comments on the report and predicts what to expect in the coming months.
“‘This is welcome economic news since many predictions called for a slight rise of perhaps around .02 percent. Investors must recognize, however, that this is one single report and it does not constitute a trend. Investors need to ensure that their investments are ready for continued rises in interest rates,’ said Larry Rosenthal, CFO of Rosenthal Wealth Management, and an often cited financial analyst (see the last paragraph).
“‘We will likely continue to see economic expansion and rising corporate profits but because of the Trump tax cut package and increased government spending, we should expect to see two or three interest rate hikes from the fed in the coming months. So be prepared,’ Rosenthal said.
“According to BLS, while there were increases in the seasonally adjusted indexes for shelter, medical care, and food, they were more than offset by a 4.9 decrease in the gasoline index which also resulted in the energy index falling sharply. The index for food rose 0.1 percent over the month, with the indexes for food at home and food away from home both increasing.
“The index for all items less food and energy increased 0.2 percent in March, the same increase as in February. Along with shelter and medical care, the indexes for personal care, motor vehicle insurance, and airline fares all rose. The indexes for apparel, for communication, and for used cars and trucks, all declined over the month.
“The all items index rose 2.4 percent for the 12 months ending March, the largest 12-month increase since the period ending March 2017 and higher than the 1.6-percent average annual rate over the past 10 years. The index for all items less food and energy rose 2.1 percent, its largest 12-month increase since the period ending February 2017. The energy index increased 7.0 percent over the past 12 months, and the food index advanced 1.3 percent.
“The food index rose 0.1 percent in March after being unchanged in February. The index for food away from home increased 0.1 percent in March. The index for food at home also increased 0.1 percent as four of the six major grocery store food group indexes rose.
“The Consumer Price Index (CPI) is reported by the BLS each month and measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers. The all urban consumer group represents about 93 percent of the total U.S. population. It is based on the expenditures of almost all residents of urban or metropolitan areas, including professionals, the self-employed, the poor, the unemployed, and retired people, as well as urban wage earners and clerical workers. Not included in the CPI are the spending patterns of people living in rural nonmetropolitan areas, farming families, people in the Armed Forces, and those in institutions, such as prisons and mental hospitals. Consumer inflation for all urban consumers is measured by two indexes, namely, the Consumer Price Index for All Urban Consumers (CPI-U) and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U)”.