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Inflation topped expectations once again--but just ever so slightly.
The Consumer Price Index increased by 0.4 percent in February, after rising by 0.3 percent the prior month, according to a Bureau of Labor Statistics report released on Tuesday. Over the past 12 months, prices have climbed by 3.2 percent, compared with 3.1 percent in January. Economists had expected annualized inflation levels to hold steady at 3.1 percent.
The core index, which strips out the more volatile food and energy costs, rose 0.4 percent in February, unchanged from the prior month, and 3.8 percent over the past 12 months, compared with the economists' forecast of 3.7 percent.
The February uptick in prices was largely driven by the increase in the cost of housing, which climbed by 0.4 percent, and gas, which surged by 3.8 percent after falling by 0.9 percent in January. On a longer-term basis, though, prices still show some signs of leveling off closer to the Federal Reserve's long-term inflation goal of 2 percent. Calculated over a six-month annualized basis, headline CPI cooled to 3.2 percent, while the core index clicked up to 3.9 percent.
While economists at Wells Fargo said, "The details of today's CPI report generally were encouraging," as many experts have contended, this last mile of reining in inflation may prove to be the most difficult.
"We've kind of plucked all those gains earlier on in the cycle when energy prices started to come down significantly," says KPMG senior economist Yelena Maleyev. "There are still a lot of upside risks." She adds, "Services--things like insurance costs--have been coming up, so there are going to be a lot of areas that we will pay attention to within the services sector, which has still remained quite robust based on the job gains that we've seen and the wage gains that we've seen."
Even though price hikes have moderated from the 40-year highs felt in the summer of 2022, inflation remains one of the most pressing problems facing entrepreneurs. In a February survey from the National Federation of Independent Business, inflation ranked as the top concern among business owners, with 23 percent citing it, up from 20 percent from the month before.
Among business owners and consumers, there is a real sense of exhaustion about elevated price levels, because most people still anchor their expectations with what they paid for groceries, rent, or gas before the pandemic, Maleyev explains. "Realistically, households don't even really think about inflation as in the change in prices. They think about price levels. Am I paying more for something today than I paid for that same thing in 2019?" she says. "Chances are, the answer is yes."
In February, the costs of housing, airline tickets, car insurance, used vehicles, clothing, and recreation all increased, while the prices of personal care items and household furnishings came down. The overall food index remained unchanged with the cost of groceries holding steady and the cost of eating out at restaurants ticking up by 0.1 percent. In February, the cost of dairy products fell thanks to a dip in the price of cheese. Food and vegetable prices also decreased. Over the past 12 months, the cost of food has fallen 2.2 percent.
Fed chairman Jerome Powell has said that policymakers need to see more months of cooling inflation data before feeling confident enough to bring down interest rates, and this report will likely not ease their concerns.
Instead, these sticky inflation numbers will keep policymakers in a wait-and-see mode, says EY senior economist Lydia Boussour. "Fed officials will likely put this inflation report in the 'not so good' column as they continue to exercise caution in assessing when to start easing policy," she says. "While the path may prove bumpy, we expect inflation will continue to move lower in coming months."
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Inflation Tops Expectations by a Tad in February
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13.03.2024
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Inflation topped expectations once again--but just ever so slightly.
The Consumer Price Index increased by 0.4 percent in February, after rising by 0.3 percent the prior month, according to a Bureau of Labor Statistics report released on Tuesday. Over the past 12 months, prices have climbed by 3.2 percent, compared with 3.1 percent in January. Economists had expected annualized inflation levels to hold steady at 3.1 percent.
The core index, which strips out the more volatile food and energy costs, rose 0.4 percent in February, unchanged from the prior month, and 3.8 percent over the past 12........
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