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Economy in Brief

Higher Energy Prices Lift U.S. CPI By Most Since July; Core Pricing Power Firm
by Tom Moeller March 18, 2009

Last year's sharp decline in energy prices came to an abrupt end with the turn of the calendar page to 2009; and the consumer price index published by the Bureau of Labor Statistics (along with consumers' wallets) noted the shift. During February, the CPI rose for only the second time since July. The 0.4% increase followed an unrevised 0.3% January gain as a 3.3% rise in energy prices roughly doubled their January increase. The latest increase in the CPI  slightly outpaced Consensus expectations for a 0.3% rise.

The increase in energy prices reflected higher gasoline prices which jumped by 8.3% following the 6.0% January rise. Despite these gains, however, prices are more than one-third lower versus last February. This month gasoline prices have held the higher February level of $1.92 per gallon of regular but this week have moved even higher. Offsetting some of that upward pressure have been lower fuel oil prices. They fell 1.8% last month (-21.4% y/y) and have fallen in each month since July. Similarly, prices for natural gas & electricity have fallen in all but one of the last seven months though they still are 5.7% higher than last February.

Some of that upward pressure has been relieved by a moderation in food & beverage price increases. Prices actually slipped 0.1% last month after 0.1% upticks during January and  December. Nevertheless, food prices still are a firm 4.7% higher than last year but that's versus a 6.3% comparison this past fall. Recent weakness has been led by lower dairy product prices (-1.7% y/y) and five consecutive months of slight decline in meat and dairy product prices (+4.2% y/y).

Core prices (CPI less food and energy) rose for the second month by 0.2%. Those gains were the strongest since August and moved the year-to-year increase up slightly to 1.8%.

Core goods prices increased a firm 0.4% and that was enough to lift the three-month change to 1.2% (AR), its highest since last August. Prices of new & used motor vehicles rose 0.5% (-2.5% y/y) while apparel prices jumped 1.3% (0.8% y/y). Prices for household furnishings & operations firmed by 0.2% after the slight January decline and the y/y change remained healthy at 1.9%. Tobacco prices again were quite strong and rose 0.7% to leave them up 6.3% y/y.

Gains in core services prices moderated even further and posted a 0.1% uptick. The three-month rate of increase remained a low at 1.6% (AR) after growing at a 3.9% rate this past summer. That moderation owes mostly to weakness in the housing market which caused February shelter prices to fall slightly. That was enough to pull the three-month change down to 0.7%. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, ticked up 0.1% (2.1% y/y). The increase in medical care services prices fell back to 0.3% (3.1% y/y) while education costs rose a moderate 0.4% (5.5% y/y).  Public transportation prices fell hard like they did during the prior month by 1.9%. They were down for the sixth consecutive period (-1.8% y/y). The increase in recreation prices held firm at 0.4% (1.9% y/y). v The chained CPI, which adjusts for shifts in consumption patterns, rose 0.6%, about as it did during January. Less food and energy, chained prices firmed even more and doubled the January increase of 0.2%.

The consumer price data is available in Haver's USECON database while detailed figures can be found in the CPIDATA database.

The Impact of Credit Easing So Far from the Federal Reserve Bank of Cleveland is available here

Consumer Price Index (%) February January Y/Y  2008 2007 2006
Total  0.4 0.3 0.1 3.8 2.9 3.2
Total less Food & Energy 0.2 0.2 1.8 2.3 2.3 2.5
  Goods less Food & Energy 0.4 0.1 -0.0 0.1 -0.4 0.2
    Services less Energy 0.1 0.2 2.5 3.1 3.4 3.4
  Energy 3.3 1.7 -19.1 13.5 5.7 11.0
  Food & Beverages -0.1 0.1 4.7 5.4 3.9 2.3
              
Chained CPI: Total (NSA)  0.6 0.5 -0.3 3.3 2.5 2.9
 Total less Food & Energy  0.4 0.2 1.3 2.0 2.0 2.2
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