February CPI: Moderate Increase Despite Jumps in Volatile Areas

The consumer price index rose 0.3% in February, a touch above the average in the prior six months. (Measured with more precision, the latest change was 0.27%, up from an average of 0.23% in the prior six months.) The increase left the year-over year change at 2.4%, the same as in January.

The food and energy components account for the above-average increase In February, as both posted high-side readings (0.4% and 0.6%, respectively). The increase in energy prices was not especially troubling, as it followed a drop of 1.5 percent in January and did little damage to a tame underlying trend, although that friendly trend will begin to shift in response to the conflict in the Middle East. The increase in food prices, while not alarming, should not be downplayed, as it marked the second noticeable advance in the past three months (0.6% in December).

Excluding food and energy, prices rose 0.2%, matching the average of the past six months and keeping the year-over-year change steady at 2.5%. The core component seemed uneventful at first blush, but in fact it showed two notable changes: apparel prices rose 1.3% and airfares jumped 1.4%. These areas often move erratically, with sharp increases typically followed by discounting within a few months. That pattern could well unfold again, but both areas also have shown hints of stirring in the past few months. Apparel prices have now increased for four consecutive months, with the latest change pulling the level of the index out of the range in place in the past two years. The increase of 1.4% in airfares followed jumps of 6.5% and 3.8% in the prior two months, and this index also jumped out of a tight range that had been in place. Given the volatile nature of these items, odds favor easing in coming months, but they bear watching.

Outside of apparel and airfares, the core CPI was well behaved, with most areas showing modest changes. The favorable performance is evident in the breakdown of core prices between goods and services. During 2024 and much of 2025, an acceleration in goods prices seemed an inflation threat, but this area has cooled recently. Service prices also raised questions about the inflation outlook last year, as the steady deceleration came to a halt in the spring and summer. However, core service prices again began to decelerate in the fall. The pace of deceleration has slowed in the past few months, influenced by airfares, which hopefully will shift gears soon.

The outlook for core service inflation also has improved because of an easing in rental inflation. As inflation cooled after the 2021-22 burst, rents joined the trend but moved much more slowly than other areas. However, the pace of deceleration picked up late last year, with October and November registering modest increases. High-side readings in December and January suggested renewed upward pressure on rents, but a modest increase in February (0.1%) raises the possibility that rents will be less problematic than in the prior few years.

The Consumer Price figures can be found in Haver's USECON database. The expectations figure is contained in the AS1REPNA database.