CPI: Inline With Expectations As Key Core Component Continues To Slow

Bottom Line: Headline consumer inflation increased in February as expected. Consumer prices are now 2.26% above their year ago level. Meanwhile, core consumer prices rose modestly and are 1.86% above their year ago level. The trend in "Owners' Equivalent Rent" (a major component of core CPI that is an estimate of the cost of shelter) continues to show modest deceleration, suggesting moderating core CPI going forward. Medical care prices (over 10% of core when including both the service and commodity components) are also showing deceleration on a trend basis. Overall, the trend rate of both core and headline inflation remains modest. The CPI ROSE by 0.2% in February, compared with market expectations for an increase of 0.2%.

• Food prices were unchanged while energy prices rose by 0.1%.
• Prices for gasoline fell by 0.9% while prices for fuel oil declined by 2.1%, prices for electricity climbed by 0.4%, and prices for natural gas rose by 4.7%.
• Energy prices are now 8.0% ABOVE their year ago level.

Overall consumer prices are now 2.3% ABOVE their year ago level; in February 2017, consumer prices were 2.8% ABOVE their year ago level. The Core CPI ROSE by 0.2%, compared with market expectations for an increase of 0.2%. Prices for commodities excluding food and energy commodities rose by 0.1%.

• Gains in apparel (+1.5%), alcoholic beverages (+0.2%), were offset by declines in new vehicles (-0.5%), medical care (-0.3%).
• Prices for services excluding energy services rose 0.2% with moderate increase in transportation (+1.0%), owner's equivalent rent (+0.2%), and shelter (+0.2%).

Core consumer prices are now 1.9% ABOVE their year ago level; in February 2017, consumer prices were 2.2% ABOVE their year ago level.