The US Consumer Price Inflation In February 2023

(15 Mar. 2023) According to the latest data from the U.S. Bureau of Labor Statistics (BLS), U.S. consumer prices annual growth eased to 6.0% in February, which is 0.4 percentage points lower compared to previous month. Compared to January 2023 monthly consumer price index went up 0.4% and core CPI growth accelerated to 0.5%.

Here are key insights from the latest BLS report.

• February deceleration in annual CPI growth happened mainly due to high base of comparison. Because of this statistical efect year-over-year CPI growth will contimue to decelerate further through the first half of 2023.
• Month-over-month CPI growth in February was four times above 2010-2020 average.. Shelter, food and recreation services contributed the most to the of monthly CPI growth in February. Increase in prices for these consumer expenditure items added 0.26, 0.05 and 0.04 percentage points to month-over-month CPI growth, respectively. Food inflation is easing in recent month because of growing global food supply and retreating agricultural input costs (fuels, electricity, chemicals and fertilisers). 
• Categories of utility gas services, used cars and trucks and medical care services were the key contributor to inflation deceleration. In February price decrease for these expenditure categories lowered monthly CPI growth by 0.07, 0.07 and 0.05 percentage points, respectively. 
• The most worrying signal is the widespread price growth among many expenditure categories. Detailed data shows that the median inflation rate for the 90-category sample stood at 0.47% month-over-month in February meaning that half the expenditure categories saw inflation increases at or above this rate. In 2021 and 2022 median inflation stood at 0.30% and 0.46% moth-over-month on average.
• The latest data on retail gasoline prices, gasoline and natural gas futures indicates that energy prices will likely contribute to inflation acceleration in March. Rebuilding of SPR oil reserves can also accelerate inflation later in 2023.

Alternative data sources and other indirect inflation indicators in datasets available through Knoema provide additional context and insight into what we may see in the months to come:

• Some indirect indicators point to stabilisation and lowering in inflation pressure. According to the National Federation of Independent Business's small business actual price change indicator, which, when viewed with a six-month time lag, can serve as a leading indicator predicting the CPI trend, the number of small businesses revising selling prices upwards has been declining, which may translate into further inflation deceleration through 2023.
• Median one-year-ahead inflation expectations declined by 0.8 percentage point to 4.2 percent, according to the February Survey of Consumer Expectations. Three-year-ahead expectations remained at 2.7 percent. In March 2023 the U.S. breakeven inflation rates continued to move in its long-term average range.
• Recent data on the national home rent indices from the Apartment List and Zillow indicate that the growth in shelter component of CPI index will likely decelerate in the near-term future.

The analysis of price movements across separate value chains indicates the essential decrease in potential for the cost-push inflation.

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