CPI Increases 2.1%: Trend Line is Up

The Consumer Price Index (CPI) rose 2.1% year-over-year (YoY) in February 2011 in line with Econintersect’s expectations (analysis here of February PPI).

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 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 increased 2.1 percent before seasonal adjustment. 

Though the seasonally adjusted increase in the all items index was broad-based, the energy index was once again the largest contributor. The gasoline index continued to rise, and the index for household energy turned up in February with all of its components posting increases. Food indexes also continued to rise in February, with sharp increases in the indexes for fresh vegetables and meats contributing to a 0.8 percent increase in the food at home index, the largest since July 2008.

The index for all items less food and energy rose in February as well. Most of its major components posted increases, including the indexes for shelter, new vehicles, medical care, and airline fares. The apparel index was one of the few to decline.

The 12-month changes in major indexes continue to trend upward. The all items index increased 2.1 percent for the 12 months ending February; the figure was 1.1 percent as recently as November. The 12-month increase in the index for all items less food and energy reached 1.1 percent in February after being as low as 0.6 percent in October. The 11.0 percent increase in the energy index is the largest since May 2010, while the 2.3 percent rise in the food index is the largest since May 2009.

Red data = core CPI                   Blue data = total CPI

Many economists view price increases using core (price increases less food and energy).  Econintersect has analyzed this approach showing that food moves synchronously with core.  Remember 36% of the CPI is housing based (41% including energy) with 17% food and about 10% of the index is energy related.

The question for today is how the crisis in Japan will play out in the future of CPI inflation.  At the current time, it seems that there will be little impact provided this crisis does not escalate into a recessionary event (currently very unlikely).   Therefore the trend on price increases remains up.

Related Articles

PPI Does Not Look Good  by Steven Hansen

Beware:  Core CPI Follows Food Inflation  by Steven Hansen

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