U.S. CPI Increase Moderates; Energy Prices Decline

The Consumer Price Index nudged 0.1% higher during February following a 0.6% January increase. The gain outpaced expectations for m/m stability in the Action Economic Forecast Survey. Despite last month's moderation, the y/y increase accelerated 2.7%, the strongest rise since March 2012. Core pricing power moderated to 0.2% from 0.3% and matched expectations. The annual gain in core prices has been steady near 2.2% since late 2015.

A 1.0% decline in energy prices led the moderation in inflation last month. The y/y gain picked up, however, to 15.2%, also the strongest since 2011. Gasoline prices declined 3.0% (+30.7% y/y) after a 7.8% jump, while fuel oil prices eased 0.4% (+28.0% y/y). Showing strength were natural gas prices which jumped 1.5% (10.9% y/y) and electricity costs, up 0.8% (1.9% y/y).

Little change in core goods prices (-0.5% y/y) contrasted with a 0.4% January increase. Used car & truck prices fell 0.6% (-4.3% y/y) while new car & truck prices eased 0.2% (+0.5% y/y). Medical care goods prices also fell 0.2% (+4.1% y/y). Recreation goods prices eased 0.1% (-3.3% y/y), though video & audio equipment costs rose 0.5% (-12.6% y/y). Home furnishings prices also were off 0.1% (-1.7% y/y). To the upside were apparel prices which increased 0.6% (0.4% y/y) following a 1.4% jump. Household appliance prices also strengthened 0.4% (-3.7% y/y), the strongest monthly increase since July 2014.

The increase in core services prices has been steady at 0.3% (3.1% y/y) for the last four months. Recreation services prices strengthened 0.9% (3.8% y/y), a record annual rate of increase. Transportation services prices jumped 0.7% (3.6% y/y), the strongest of four monthly increases. The cost of public transportation jumped 1.4%, though it was unchanged y/y. Shelter prices gained 0.3% (3.5% y/y) as rents also increased 0.3% (3.6% y/y). The owners' equivalent rent of primary residences rose 0.3% (3.5% y/y). Medical care services costs increased 0.2% (3.4% y/y) for the fourth straight month. Education & communications prices eased 0.2% (-0.1% y/y), but tuition costs gained 0.2% (2.5% y/y).

Food prices increased 0.2% (2.2% y/y), the only increase since last April. Meat prices gained 0.3% (-3.0% y/y), the first rise since September 2015. Fruit & vegetable costs firmed 0.7% (-4.7% y/y) after a 1.7% decline. Dairy product prices increased 0.8% (0.4% y/y), but egg prices declined 4.6% (-23.6% y/y). Cereal & bakery product prices eased 0.4% (-1.1% y/y).

The consumer price data is available in Haver's USECON database while detailed figures can be found in CPIDATA. The expectations figure is from Action Economics and is found in the AS\1REPNA database.