March Consumer Price Index: Energy and Shelter Costs Rise

April 17, 2015

by Doug Short

The Bureau of Labor Statistics released the March CPI data this morning. The year-over-year unadjusted Headline CPI came in at -0.07% (rounded to -0.1%), down from -0.03% (rounded to 0.0%) the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.75% (rounded to 1.8%), up from the previous month's 1.70%. The non-seasonally adjusted month-over-month Headline number was up 0.60%, and the Core number was up 0.41% (rounded to 0.4%).

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data, which calls attention to increases in energy and shelter:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 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 declined 0.1 percent before seasonal adjustment.

Increases in the energy and shelter indexes more than offset a decline in the food index and were the main factors in the rise of the seasonally adjusted all items index. The energy index rose 1.1 percent as advances in the gasoline and fuel oil indexes outweighed declines in the electricity and natural gas indexes. In contrast, the food index declined 0.2 percent, with the food at home index posting its largest decline since April 2009.

The index for all items less food and energy rose 0.2 percent in March, the same increase as in January and February. Along with the shelter index, a broad array of indexes rose in March, including medical care, used cars and trucks, apparel, new vehicles, household furnishings and operations, and recreation. The index for airline fares, in contrast, declined for the fourth time in the last 5 months.

The all items index declined 0.1 percent for the 12 months ending March. The energy index declined 18.3 percent over the span, more than offsetting increases in the indexes for food (up 2.3 percent) and all items less food and energy (up 1.8 percent).   [More…]

Investing.com was looking for a 0.3 increase in Headline CPI and a 0.2% rise in Core CPI. Year-over-year forecasts were 0.1% for Headline and 1.7% 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.

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

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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.

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