Home > Main > June Headline CPI could be 2.3%, down 1.3% from May, due to falling gas prices.

June Headline CPI could be 2.3%, down 1.3% from May, due to falling gas prices.

June 20, 2011

Gas Prices are going down

Gasoline prices have been falling like crazy in June.  Gas is already down $.14 in June.  You can see the remarkably straight line decline – it’s about 2 cents every 3 days.

Here at Crucible headquarters, we can do simple math.  I assumed 10 more days of price declines at the same rate, which would shave another 6 cents off the price of gasoline, for a total of $.20 of declines.   That’s 5.2% decrease in the price of gasoline.

Then I went over to the macroblog at the fed, and used their handy guide to how to calculate CPI given a few prices. I then pushed this into a spreadsheet, using the same assumptions as David Altig did at his Atlanta Fed blog.

It turns out that if gas declines another 6 cents, headline CPI will be 2.3%.  Thats down 1.3% from May!  Then if we see a bit of spillover from lower energy prices into lower food costs – say for example if corn loses ethanol subsidies and drops 20% or something like that – we could see an extended period of lower CPI.

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