February 2017 CPI: Year-Over-Year Inflation Rate Now 2.7%. Inflation Grabbing

by Doug Short / Jill Mislinski and Steven Hansen

According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 2.7 % – up from than last month’s 2.5 %. The year-over-year core inflation (excludes energy and food) rate declined 0.1 % to 2.2 %, and remains slightly above the target set by the Federal Reserve.

Analyst Opinion of the Consumer Price Index

It was the energy sector which caused the increase in the headline CPI, This is the highest rate of inflation seen in over one year.

The market expected (from Bloomberg / Econoday):

  Consensus Range Consensus Actual CPI-U – month-over-month (MoM) 0.0 % to 0.2 % +0.1 % +0.1 % CPI-U year-over-year (YoY) 2.6 % to 2.8 % +2.7 % +2.7 % CPI less food & energy (MoM) 0.0 % to 0.3 % +0.2 % +0.2 % CPI less food & energy (YoY) 2.2 % to 2.3 % +2.2 % +2.2

z cpi1.png

As a generalization – inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy – and cannot be used as a economic indicator.

The major influence on the CPI was again energy prices.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in February on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.7 percent before seasonal adjustment.

The February increase was the smallest 1-month rise in the seasonally adjusted all items index since July 2016. The gasoline index declined, partially offsetting increases in several indexes, including food, shelter, and recreation. The energy index fell 1.0 percent, with the decline in gasoline outweighing increases in the other energy component indexes. The food index increased 0.2 percent over the month, its largest rise since September 2015.

The index for all items less food and energy rose 0.2 percent in February. The indexes for shelter, recreation, apparel, airline fares, motor vehicle insurance, education, and medical care were among those that increased in February. Indexes that declined include communication, used cars and trucks, new vehicles, and household furnishings and operations.

The all items index rose 2.7 percent for the 12 months ending February; the 12-month increase has been trending upward since a July 2016 trough of 0.8 percent. The index for all items less food and energy rose 2.2 percent over the last 12 months; this was the fifteenth straight month the 12-month change remained in the range of 2.1 to 2.3 percent. The energy index rose 15.2 percent over the last year, while the food index was unchanged.