CPI: Airfare Slide Started To Hit In February

Bottom Line: Core consumer price inflation rose as expected in February. Owner's Equivalent Rent, a key measure of the price of shelter, was up 0.25% and was accelerating slightly on a trend basis, which bears watching going forward. Medical care commodity prices were lower, while medical services prices were higher. Of course, both of these categories bear watching in the coming month amid the Covid-19 pandemic. Airfare prices were lower in February as airlines had already started to see slower volumes. Overall, core inflation remains modest but rebounded slightly in the last three months, now in a range just above 2%. Expect increased volatility in the coming months with a downward bias initially but the potential for a rebound by the summer. The CPI ROSE by 0.09% in February, compared with market expectations for no change.

• Food prices increased by 0.37% while energy prices fell by 2.0%.
• Prices for gasoline fell by 3.4% while prices for fuel oil declined by 5.7%, prices for electricity slipped by 0.1%, and prices for natural gas fell by 0.9%.
• Energy prices are now 2.8% ABOVE their year-ago level.
• Overall consumer prices are now 2.3% ABOVE their year-ago level; in February 2019, consumer prices were 1.5% ABOVE their year-ago level.

The Core CPI ROSE by 0.22%, compared with market expectations for an increase of 0.20%.

• Prices for commodities excluding food and energy commodities rose by 0.2%.
• Gains in tobacco (+0.6%), apparel (+0.4%), were partly offset by declines in medical care (-0.6%).
• Prices for services excluding energy services rose 0.2% with a moderate increase in transportation (+0.3%), shelter (+0.3%), and medical care services (+0.3%).
• Core consumer prices are now 2.4% ABOVE their year-ago level; in February 2019, consumer prices were 2.1% ABOVE their year-ago level.