CPI: Energy Prices Decline, Core Inflation Rises

March 16, 2016
Bottom Line: Headline consumer inflation declined in February as expected due to lower energy prices. Consumer prices are now 1.0% above their year ago level. Meanwhile, core consumer prices rose moderately, more than expected and are 2.3% above their year ago level. Owners' Equivalent Rent (a major component of CPI that is an estimate of the cost of shelter) rose by 0.3%, 3.2% year-over-year and has moved up 50 bps over the past year. Overall headline inflationary pressures at the consumer level still remains muted but core prices are rising at a faster pace over the last 3 months at 3% annualized. The CPI FELL by 0.2% in February, in line with market expectations. Food prices increased by 0.2% while energy prices fell by 6.0%. Prices for gasoline plunged by 13.0% while prices for fuel oil declined by 4.2%, prices for electricity slipped by 0.2%, but prices for natural gas rose by 1.0%. Energy prices are now 12.7% BELOW their year ago level. Overall consumer prices are now 1.0% ABOVE their year ago level; in February 2015, consumer prices were 0.1% BELOW their year ago level. The Core CPI ROSE by 0.3%, compared with market expectations for an increase of 0.2%. Prices for commodities excluding food and energy commodities rose by 0.3%. Gains were driven by increases in apparel (+1.6%), medical care (+0.6%), alcoholic beverages (+0.2%), new vehicles (+0.2%), tobacco (+0.2%) and used cars & trucks (+0.2%). Prices for services excluding energy services rose 0.3% with moderate increases in medical care services (+0.5%), shelter (+0.3%) and owner's equivalent rent (+0.3%). Core consumer prices are now 2.3% ABOVE their year ago level; in February 2015, consumer prices were 1.7% ABOVE their year ago level.
Article by contingentmacro