U.S. Inflation Stubbornly High with February CPI at 6%

The annual rate of inflation slowed for an eighth straight instance and marked the lowest level in seventeen months, but U.S. consumer prices remained elevated and underlying or core inflation ticked higher in February, according to a U.S. government report released Tuesday, March 14.

Americans felt some reprieve last month in what they had to pay at the gas pumps and to heat their homes. They also spent a smidgen less for groceries compared to January. Inflation pressures remained, however, with prices high for many good and services, or even sharper than before, like for housing.

In the headline monthly figure, U.S. consumer prices rose 0.4% in February, after rising 0.5% January, the Labor Department said in its monthly report on the Consumer Price Index (CPI). The CPI is a broad measure of what Americans pay for everyday items ranging from eggs to energy.

Overall food prices eased a bit, up 0.4% for the month from 0.5%. Within the category, grocery prices slowed a tad to 0.3% against 0.4% previously, while the cost of eating out rose 0.6% for a second month in a row.

Food inflation over the past year remained elevated at 9.5% but down from 10.1%. Over the same time, grocery prices rose 10.2% from 11.3%, and the cost of foods consumed outside of the home picked up 8.4% from 8.2%.

Elsewhere, prices at the pump rose 1% in February after increasing 2.4% in January. Their year-on-year level fell 2% after climbing 1.5% previously. Looking back for some perspective, last year’s high-water mark happened in the 12 months ending June when gasoline inflation at 59.9% was the most since March 1980.

The broader index for energy, which combines items like gasoline, electricity, and fuel oil, declined 0.6% for the month after stepping up 2%. Energy prices year-over-year rose 5.2% compared to 8.7% previously.

Excluding the more volatile food and energy components, the rate of core consumer prices quickened to 0.5% in February from 0.4%.

Shelter or housing prices for the month advanced 0.8% from 0.7, while they surged 8.1% year-over-year for their biggest 12-month increase since June 1982.

"The index for shelter was the largest contributor to the monthly all items increase, accounting for over 70 percent of the increase, with the indexes for food, recreation, and household furnishings and operations also contributing," the Labor Department’s monthly report said.

Components of shelter include pricing items like rent for apartments, rental equivalence, lodging away from home such as hotels and motels, and housing at schools. This index accounts for about one-third of the entire CPI.

In other closely watched pricing categories:

• Clothing prices for the month rose 0.8% for a second straight month. They increased 3.3% from a year ago.
• New vehicle prices increased 0.2% for a second month in a row, for 22 straight advances, while they climbed 5.8% year-over-year.
• Prices for used cars and trucks, however, dropped for an eight consecutive month, falling 2.8% most recently, while their year-on-year level fell 13.6%. As a stark contrast, a year ago February they logged a soaring year-on-year pace of 41.2%.
• Compared to a year earlier, airline fares jumped 26.5% from 25.6%. They soared 6.4% in February, after sliding 2.1% in January for their fourth straight decline.

As for the headline annual figure, inflation rose 6% from a year earlier compared to 6.4% previously. The rate marks the smallest annual gain since September 2021. For some perspective, last year’s high-water mark happened in the 12-month period ending July at 9.1%, which registered as the fastest rate of inflation since November 1981. Still, inflation rates have now been at or above 6% for seventeen consecutive months.

Meanwhile, core inflation rose 5.5% over the past year against 5.6% previously. The core, "all items less food and energy" index is one of the benchmark inflation rates monitored by the Federal Open Market Committee (FOMC) as it guides the central bank when setting its key interest rate. As recently as September, the core rate at 6.6% was the highest since August 1982. Many economists look to the core reading as a better predictor for future inflation.

"Inflation is proving too sticky for the Fed’s liking and, at the moment, likely weighs toward a 25-basis-point rate increase next week," Reuters quoted Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "But the central bank is also caught between the rock of stubborn inflation and a hard place of financial instability."

"What was a tricky task for the Fed, raising rates by enough to cool off inflation, but not by too much as to push the economy into recession, has gotten even more difficult with the recent bank failures," MarketWatch quoted chief economist Gus Faucher of PNC Financial Services. "The big increase in interest rates over the past year is exposing stresses in the financial system."

The following table of key inflation figures is for the last seven months through February, as published by the U.S. Labor Department’s Bureau of Labor Statistics (www.bls.gov/cpi) on March 14, 2023. To index the data each month, the BLS monitors the prices of about 80,000 consumer goods and services from around the nation. All monthly and annual pricing changes are in percentages.

August 2022 to February 2023 Consumer Prices – Gains & Losses in Percent
(Seasonally Adjusted from Prior Month and Unadjusted 12-Month)

The BLS releases inflation data around the middle of a month for consumer prices surveyed up to the previous month. The Consumer Price Index (CPI) for February and the latest annual period become public on April 12, 2023.

CPI data is used in calculating inflation rates and in this site’s U.S. Inflation Calculator. The US Inflation Calculator shows cumulative inflation and the change in buying power of the U.S. dollar over time.