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March Consumer Price Index: Both Headline and Core Unadjusted Inflation Decline

April 14, 2016

by Doug Short

The Bureau of Labor Statistics released the March CPI data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 0.85%, down from 1.02% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.19%, down slightly from the previous month's 2.33%.

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

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 0.9 percent before seasonal adjustment.

The food index declined in March, while the indexes for energy and for all items less food and energy rose, leading to the slight seasonally adjusted increase in the all items index. The food index fell 0.2 percent after rising in February, as five of the six major grocery store food groups declined. The energy index rose for the first time since November, with all of its major components except natural gas increasing.

While the index for all items less food and energy increased in March, the 0.1 percent advance was the smallest increase since August. Major component indexes were mixed in March. The indexes for shelter, recreation, medical care, education, tobacco, and personal care were among those that rose, while the indexes for apparel, airline fares, communication, household furnishings and operations, and used cars and trucks all declined.

The all items index rose 0.9 percent over the last 12 months, a slightly smaller increase than the 1.0-percent change for the 12 months ending February. The index for all items less food and energy has risen 2.2 percent over the last 12 months, and the food index has increased 0.8 percent. Despite rising in March, the energy index has declined 12.6 percent over the last year. [More…]

Investing.com was looking for a 0.2% increase MoM in both the seasonally adjusted Headline and Core CPI. Year-over-year forecasts were 1.1% for Headline and 2.3% 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. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

Headline and Core CPI since 2000

The next chart shows both series since 1957, which was the first time the government began tracking Core Inflation.

Headline and Core CPI

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 in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI remains below the PCE target range of 2 percent.