# May CPI Data Out

The consumer price index (CPI) data for May was released yesterday, showing a two point spike in both the national and southeast averages. If we calculate the inflation rate for this year. All is not well.

In 2007, the entire inflation was 4.44% for the southeast and 4.08% for the nation as a whole:

Southeast = [ ( 203.457 – 194.8 ) / 194.8 ] * 100 = 4.44%
National = [ ( 210.036 – 201.8 ) / 201.8 ] * 100 = 4.08%

In just the first five months of 2008 we are rapidly approaching the same figures. The southeast inflation for January 2008 through May 2008 is 3.22%. The national inflation for the same period is 3.14%.

Southeast = [ ( 210.006 – 203.457 ) / 203.457 ] * 100 = 3.22%
National = [ ( 216.632 – 210.036 ) / 210.036 ] * 100 = 3.14%

If we look at these numbers we can estimate the total inflation for the year, ceteris paribus. By calculating the change from month to month for each region we are interested in we can arrive at an average change per month. If we then apply this to the rest of the months in the year we can figure inflation for the total period, giving us our estimate.

Here are the numbers:

 National CPI Southeast CPI National ? Southeast ? 12/2007 210.036 203.457 01/2008 211.080 204.510 1.044 1.053 02/2008 211.693 205.060 0.613 0.550 03/2008 213.528 206.676 1.835 1.616 04/2008 214.823 208.085 1.295 1.409 05/2008 216.632 210.006 1.809 1.921 Average 1.319 1.310

So with a average change of 1.310 for the southeast and 1.319 for the nation, we can calculate the estimated inflation for the year by adding the current CPI for each region to the region’s average, times the number of months remaining in the year (7):

Est. Southeast CPI = 210.006 + ( 7 * 1.310 ) = 219.176
Est. National CPI = 216.632 + ( 7 * 1.319 ) = 225.865

We can now recalculate the inflation, using these latest numbers, to arrive at our estimated inflation for the year:

Southeast = [ ( 219.176 – 203.457 ) / 203.457 ] * 100 = 7.73%
National = [ ( 225.865 – 210.036 ) / 210.036 ] * 100 = 7.54%

So using our estimation, based on the current progress of the year, we are looking at total inflation for the year capping out around 7.73% in the southeast and 7.54% nationally.

Pretty scary, huh?

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