Thursday, October 13, 2011

CPI, Cola, PPI


Name
Class
10/02/2011
1.      You read that in 1960 gas cost 31 cents a gallon. How could you tell if gas increased faster or slower than most goods and services? Convert the price into today’s dollars by using CPI.
CPI 1960=29.6           CPI 2011=225.4
2011 price=1960 price x (2011 CPI/1960 CPI)
2.36 = .31(225.4/29.6)
The average price of gas today $3.64 a gallon, therefore the price of a gallon of gas has risen in price faster than most other goods and services.

2.      Cola is an adjustment that occurs automatically every year. It was put in place by Congress in 1972 in order to maintain the purchasing power of people receiving benefits from Social Security. Cola is based off the percentage change in the consumer price index for urban wage earners and clerical workers (CPI-W).

The first increase for cola occurred in 1975 it was for 8.0%. For the years January 2007, January 2008, January 2009 cola increased 3.3%, 2.3%, 5.8% respectively. January 2010 and 2011 there was a 0.0% increase in cola meaning there was no rise in benefits for Social Security recipients. Cola did not rise in 2011 because there hasn’t been a rise in CPI-W since the third Quarter of 2008.
3.      Quarter to quarter GDP growth shows the 1st, 3rd, 4th quarters of 2008 showed a decline with only the second quarter showing a small increase. The 1st and 2nd quarter of 2009 showed a decline in GDP while the last two quarters showed increases. Since the last half of 2009 GDP has risen every quarter up to the second quarter 2011. First quarter 2011 GDP only rose by .4%. Second quarter 2011 GDP increased by 1.3%. This shows the economy is still growing, but has fluctuated a lot recently.

The chart of personal income from May to August shows some volatility with consumer spending rising than falling same seems to be true with disposable income it rises than falls sharply. In August personal income fell .1% while the prior month it increased .1% so personal income has remained flat for at least two months.

4.      Unemployment has held at 9.1% since July with about 14 million people are without a job. 6 million of those people are long term unemployed making long-term unemployment 42.9% of the unemployed population. Healthcare continues to add jobs but government  employment has a downward trend. The unemployment rate has hovered near the 9% for the last six months. The number of long term unemployed is worrisome because many of those people may give up looking for jobs and just leave the work force. Unemployment has a negative affect on the entire society it often leaders to higher crime and reduced confidence in the economy.

Consumer Price Index for all urban consumers (CPI-U) rose .4% in August. Fuel, food, shelter, clothing continues to increase. With the exception of June 2011 CPI-U has risen every month since August 2010. Prices are on the rise with personal income and disposable income being volatile, there could be a worry that prices rise faster than people can afford to pay hurting demand for many goods and services.

               Producer price index  did not change for the month of August after adjusting for seasonally changes. In July the index only rose .2 percent in July and in June it fell .4 percent. What this means is producers prices haven’t changed much over the last few months. With producer’s prices not changing much but consumer prices going up this shows that producers are in general raising their cost for other reasons other than passing on increased cost to their customers. 
 
               Productivity fell in the 1st and 2nd quarter of 2011 at a.6% and .7% annual rate. From the second quarter 2010 to second the quarter 2011 productivity increased by .7 percent. Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers. Year over year shows an improvement in productivity bust the first two quarters of 2011 show a possible downward trend. When productivity falls  there is a need for more workers because less is getting done with the people currently employed.
 
5.      After looking at the presentations and looking at the fed website I believe the presentations are updated monthly.