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October, 1986, Vol. 109, No. 10
A half-year pause in inflation:
its antecedents and structure
Inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U) declined at a seasonally adjusted annual rate of 0.2 percent during the first 6 months of 1986. While a continuation of this pattern is unlikely throughout the remainder of the year, the resulting change for 1986 will probably be the smallest annual increase since the first half of the 1960's.1
The first-half decline reflected the sharp drop in crude oil prices, as the index for energy commoditiesfuel oil, coal, bottled gas, and motor fuels fell at an annual rate of 40.2 percent in the first half of 1986. Prices for used cars and grocery store foods also declined in the first half. On the other hand, shelter costs continued to advance at an annual rate of about 5 percent. The index for all items excluding food, shelter, energy, and used cars increased at an annual rate of 4 percent during the first 6 months. Within this group, however, price movements for commodities and for services continued to diverge. Price increases in the goods sector moderated further, but prices for services, in particular medical care, accelerated. (See table 1.)
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1 See, for example, Blue Chip Economic Indicators, Aug. 10, 1986, a consensus of 52 economists, who, on average, estimate an increase of 1.9 percent in the CPI for 1986.
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