| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.4% | 0.3% to 0.4% | 0.4% | 0.3% |
| CPI - Y/Y | 3.1% | 3.1% to 3.2% | 3.2% | 3.1% |
| Ex-Food & Energy- M/M | 0.3% | 0.3% to 0.4% | 0.4% | 0.4% |
| Ex-Food & Energy- Y/Y | 3.7% | 3.7% to 3.8% | 3.8% | 3.9% |
Highlights
Februay's headline CPI rose 0.4 percent on the month, as expected, but up from 0.3 percent in January. Prices were up 3.2 percent year-over-year, above the 3.1 percent consensus expectation in an Econoday survey and higher than 3.1 percent the previous month.
Excluding food and energy, the CPI increased at a steady pace of 0.4 percent on the month, failing to ease to the 0.3 percent rate expected by forecasters. On a 12-month basis, core inflation slowed to 3.8 percent from 3.9 percent, the lowest rate since May 2021 but above the 3.7 percent consensus expectation and still far above the 2 percent central bank target. February's readings bring further arguments for the Federal Reserve to wait longer before easing.
Food prices were flat on the month, after appreciating 0.4 percent in January, while energy rebounded 2.3 percent, including a 3.8 percent gain in gasoline prices. Shelter was up 0.4 percent after 0.6 percent in January, and, combined with gasoline, contributed to 60 percent of the monthly headline CPI increase. Rent was up 0.5 percent, owners' equivalent rent increased 0.4 percent, and lodging edged up 0.1 percent. Airline fares, motor vehicle insurance, apparel, and recreation also pushed core inflation higher on the month, while personal care and household furnishings and operations were among categories recording lower prices.
On a 12-month basis, food rose 2.2 percent, while energy was down 1.9 percent, including a 3.9 percent drop in gasoline. Shelter increased 5.7 percent, down from 6.0 percent in January, and the lowest rate since July 2022, when it was also 5.7 percent. Still, shelter accounted for two thirds of the core CPI increase year-over-year.
Excluding food and energy, the CPI increased at a steady pace of 0.4 percent on the month, failing to ease to the 0.3 percent rate expected by forecasters. On a 12-month basis, core inflation slowed to 3.8 percent from 3.9 percent, the lowest rate since May 2021 but above the 3.7 percent consensus expectation and still far above the 2 percent central bank target. February's readings bring further arguments for the Federal Reserve to wait longer before easing.
Food prices were flat on the month, after appreciating 0.4 percent in January, while energy rebounded 2.3 percent, including a 3.8 percent gain in gasoline prices. Shelter was up 0.4 percent after 0.6 percent in January, and, combined with gasoline, contributed to 60 percent of the monthly headline CPI increase. Rent was up 0.5 percent, owners' equivalent rent increased 0.4 percent, and lodging edged up 0.1 percent. Airline fares, motor vehicle insurance, apparel, and recreation also pushed core inflation higher on the month, while personal care and household furnishings and operations were among categories recording lower prices.
On a 12-month basis, food rose 2.2 percent, while energy was down 1.9 percent, including a 3.9 percent drop in gasoline. Shelter increased 5.7 percent, down from 6.0 percent in January, and the lowest rate since July 2022, when it was also 5.7 percent. Still, shelter accounted for two thirds of the core CPI increase year-over-year.
Market Consensus Before Announcement
Consumer prices have come in on the high end of Econoday's consensus ranges the past two reports with February's outlook mixed. Core prices in February are expected to slow a notch to a monthly increase of 0.3 percent versus 0.4 percent in January. Overall prices are expected to rise 0.4 percent after increasing 0.3 percent in January. Annual rates, which in January were 3.1 percent overall and 3.9 percent for the core, are expected at 3.1 and 3.7 percent respectively.
Definition
The CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
Description
The consumer price index is the most widely followed monthly indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
