US Inflation Falls in February, Annual Inflation Rate Eases

US consumer prices declined in February alongside plunging gasoline but underlying inflation advanced more than expected, a government report released on Wednesday, March 16, shows. Costs climbed for a broad section of goods and services to include big ticket items like shelter and medical care.

Overall in the past 12 months, inflation eased compared to the annual rate of a month earlier yet the pace clocked higher than any other since late 2014.

In the headline figure for last month, consumer prices fell 0.2% after they registered flat in January, the US Labor Department said in its monthly report on the Consumer Price Index. The CPI measures what American consumers pay for everything from airline fares to fruits and vegetables.

In February, prices at the pump dived 13% following two monthly 4.8% declines. They are 20.7% lower than a year earlier. The declining trend looks to soften some with oil prices strengthening in recent weeks. Regular gasoline averaged $1.95 a gallon on Wednesday, according to AAA, up from the month-ago level of $1.70 a gallon. Still, AAA shows the year-ago price at $2.42 a gallon.

The broader index for energy, which combines items like gasoline, electricity and fuel oil, tumbled in February by 6% after two straight monthly drops of 2.8%. Energy prices fell 12.5% over the past 12 months.

Food prices rose for the first time in four months, up 0.2%, and they have advanced 0.9% from a year earlier.

Excluding volatile food and energy, so-called core consumer prices rose 0.3% in February to match the prior month’s gain which went down as the biggest increase since August 2011. The last time there were back-to-back gains of 0.3% was in early 2001, according to Bloomberg News. Reports said economists were expecting a reading of 0.2% for the month.

"There’s absolutely no denying that there are inflationary pressures," Bloomberg News quoted Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York.

The cost of owning a home or renting an apartment rose 0.3% for a second month in a row, and is 3.3% higher than a year earlier. Medical care prices also jumped 0.5% for a second straight time and they are 3.9% higher over the past 12 months. Other major monthly gains include new vehicles by 0.2%, used cars and trucks by 0.2%, and clothing by 1.6%.

US inflation picked up by 1.0% in the past year after rising 1.4% previously, the quickest annual rate of inflation since October 2014. The most recent reading is the second fastest since that time.

In rounding out the Labor Department’s report, core US inflation advanced 2.3% on an annual basis, the most since May 2012, and after rising 2.2% in the 12 months ended January. The core reading is one of the benchmark inflation rates monitored by the Federal Open Market Committee (FOMC) as it helps the central bank decide where to set the key interest rate.

"There were clear signs of mounting domestic price pressures across the board in February," The Wall Street Journal quoted economist Steve Murphy of Capital Economics. "The data released this morning undoubtedly support our view that a faster-than-anticipated rise in core inflation will force the Fed to raise interest rates faster than markets expect."

The policy-setting FOMC ends its two-day meeting on Wednesday and will release its statement at 2 p.m. ET.

"While few expect the Fed to announce a policy rate hike today, further evidence of building inflationary pressures will reinforce the case for further hikes in the coming months," Reuters quoted Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

Inflation data from the last several months and to through February 2016 is presented below. The US Labor Department’s Bureau of Labor Statistics (www.bls.gov/cpi) monitors prices of major consumer goods and services around the country, analyzes them, and then summarizes their results in monthly reports. The table offers their latest monthly and annual changes in percentages.

August 2014 – February 2016 Consumer Prices – Gains & Losses in Percent

  Aug 2015 Sept 2015 Oct 2015 Nov 2015 Dec 2015 Jan 2016 Feb 2016 12 Month
All items .0 -0.1 0.2 0.1 -0.1 .0 -0.2 1.0
  Food 0.2 0.3 0.1 -0.1 -0.2 .0 0.2 0.9
    Food at home 0.2 0.2 .0 -0.3 -0.4 -0.2 0.2 -0.3
    Food away from home 0.2 0.5 0.2 0.2 0.1 0.3 0.1 2.6
  Energy -1.7 -3.7 0.4 0.3 -2.4 -2.8 -6.0 -12.5
    Energy commodities -3.4 -6.8 0.9 0.7 -4.8 -4.8 -12.5 -20.9
      Gasoline (all types) -3.4 -7.1 0.9 0.8 -4.8 -4.8 -13.0 -20.7
      Fuel oil -8.1 -2.4 -1.1 -1.3 -7.8 -6.5 -2.9 -32.1
    Energy services 0.3 -0.3 -0.1 -0.2 -0.7 -0.7 0.1 -4.6
      Electricity 0.2 -0.1 .01 0.2 -0.4 -0.7 -0.2 -3.0
      Utility (piped) gas service 0.6 -0.9 -0.9 -1.7 -1.9 -0.6 1.0 -10.3
  All items less food, energy 0.1 0.2 0.2 0.2 0.2 0.3 0.3 2.3
    Commodities less food, energy -0.1 .0 -0.1 -0.1 -0.1 0.2 0.3 0.1
      New vehicles .0 .0 -0.1 .0 .0 0.3 0.2 0.6
      Used cars and trucks -0.3 -0.2 -0.1 0.1 0.2 0.1 0.2 0.4
      Apparel 0.2 -0.4 -0.5 -0.1 -0.2 0.6 1.6 0.9
      Medical care 0.2 -0.1 0.2 0.2 0.1 0.4 0.6 2.2
    Services less energy 0.2 0.3 0.3 0.3 0.2 0.3 0.3 3.1
      Shelter 0.2 0.3 0.3 0.2 0.2 0.3 0.3 3.3
      Transportation .0 0.1 0.1 0.5 0.3 0.4 0.2 2.6
      Medical care .0 0.2 0.7 0.3 0.1 0.5 0.5 3.9

 

US inflation data is typically published by the BLS around mid-month, and it presents the change in consumer prices from the previous month. The Consumer Price Index for March and the latest 12-month or annual period will be available on April 14, 2016.

CPI figures are also used in calculating inflation rates. They are the backbone for this site’s inflation adjustment calculator. The US Inflation Calculator provides accumulated inflation and shows the change in buying power of the American dollar over time.

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