Core CPI

In a low to moderate inflation world there is a very strong tendency for firms to raise prices once a year. As a consequence over half of the annual increase in the not seasonally adjusted core CPI occurs in the first quarter. It averages 54% in the 1st Q, 9% in the 2nd Q, 25% in the 3rd Q and 12% in the 4th Q. The third quarter budge consist largely of housing, education and autos.

Moreover, if the first quarter gain is less than(or greater than) the prior years’ first quarter increase then the annual change is generally less than(or greater than) in the prior year. There have only been a couple of exception to this rule over the last 20 years.

The first quarter data sends a strong message that core inflation is moderating, not accelerating