Core CPI Inflation Falls Modestly, Supporting Fed Pause

Core CPI Inflation - Redbook Same Store Sales Improve Slightly

Core CPI Inflation - Redbook same store sales growth was much quicker than retail sales growth in December and January. Investors are interested in seeing if this relationship continues.

This would imply retail sales growth being weaker in February since Redbook sales growth fell. I don’t think that’s likely because Redbook sales were weaker in January than December. Yet retail sales were weaker in December than January.

Either way, I’m still concerned with the decline in Redbook sales growth. Good news from the latest report is yearly growth improved from 4.2% to 4.4%. Last week’s report was the slowest in 10 months.

Month to date sales were down 0.3% which is the 9th straight negative weekly reading. The full month year over year growth rate fell to 4.4% which is the slowest growth rate since September.

Core CPI Inflation - Headline CPI Meets & Core CPI Misses Estimates

It’s no surprise that February headline CPI was near expectations. This report rarely has wide deviations from the consensus.

You could have had the same estimate for yearly core CPI for the past 11 months and gotten the result almost correct or perfectly correct. It was in between 2.1% and 2.3% in that period.

Month over month headline inflation was 0.2% which met estimates and was up from the 0% change in January. Year over year headline CPI was 1.5% as you can see from the chart below; this met estimates.

As you can see from the breakdown, housing is a major portion of CPI as it accounts for 42.2% of it. Food and beverage inflation was modest in 2018 which helped the index stay low.

(Click on image to enlarge)

The most important inflation metric is core inflation as the Fed, in theory, is supposed to cut rates if it thinks core inflation will be below 2% and raise rates if it expects it to be above 2% all else being equal.

Core CPI Inflation - was 0.1% monthly which missed estimates and last month’s reading

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