February Headline Consumer Price Index: First Increase in Five Months

March 23, 2015

by Doug Short

The Bureau of Labor Statistics released the February CPI data this morning. Year-over-year unadjusted Headline CPI came in at -0.03% (rounded to 0.0%), up from -0.09% (rounded to -0.1%) the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.70% (rounded to 1.7%), up from the previous month's 1.65% (rounded to 1.6%). The non-seasonally adjusted month-over-month Headline number was up 0.43% (rounded to 0.4%), and the Core number was up 0.35% (rounded to 0.3%).

The February nonseasonally adjusted headline number is the first increase after four months of decline.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted data monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 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 was unchanged before seasonal adjustment.

The seasonally adjusted increase in the all items index was broad-based, with increases in shelter, energy, and food indexes all contributing. The energy index rose after a long series of declines, increasing 1.0 percent as the gasoline index turned up after falling in recent months. The food index, unchanged last month, also rose in February, though major grocery store food group indexes were mixed.

The index for all items less food and energy rose 0.2 percent in February, the same increase as in January. In addition to shelter, the indexes for used cars and trucks, apparel, new vehicles, tobacco, and airline fares were among those that increased. The medical care index was unchanged, while the personal care index declined.

The all items index was unchanged over the past 12 months, after showing a 0.1-percent decline for the 12 months ending January. Over the last 12 months the food index rose 3.0 percent and the index for all items less food and energy increased 1.7 percent. These increases were offset by an 18.8-percent decline in the energy index.   [More…]

Investing.com was looking for a 0.2 increase in Headline CPI and a 0.1% rise in Core CPI. Year-over-year forecasts were -0.1% for Headline and 1.6% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. I've highlighted the two percent level, which the Federal Reserve targets as the Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

Click to View
Click for a larger image

The next chart shows both series since 1957, which was the first time the government began tracking the core inflation metric.

Click to View
Click for a larger image

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which has historically focused on core inflation as measured by the core PCE Price Index, will see that the more familiar core CPI remains below the PCE the target range of 2 percent.

Website by the Boston Web Company