February 2019 CPI: Year-Over-Year Inflation Rate Moderates To 1.5%

According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 1.5 % year-over-year (lower than the 1.6 % last month). The year-over-year core inflation (excludes energy and food) rate moderated from 2.2 % to 2.1 %, and is marginally above the target set by the Federal Reserve.

Analyst Opinion of the Consumer Price Index

Energy's increase was the main reason inflation did not abate more.. Core inflation remains marginally above 2.0 % year-over-year. Medical cost inflation continues its moderation.

The market expected (from Econoday):

  Consensus Range Consensus Actual
CPI-U - month-over-month (MoM) +0.0 % to +0.7 % +0.2 % +0.2 %
CPI-U year-over-year (YoY) +1.4 % to +1.8 % +1.6 % +1.5 %
CPI less food & energy (MoM) +0.2 % to +0.3 % +0.2 % +0.1 %
CPI less food & energy (YoY) +2.2 % to +2.4 % +2.2 % +2.1 %

As a generalization - inflation accelerates as the economy heats up, while the inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as an economic indicator.

The major influence on the CPI was energy.

The indexes for shelter and food increased, and the gasoline index rose after recent declines to result in the seasonally adjusted all items increase. The food index rose 0.4 percent, its largest monthly increase since May 2014, as both the food at home and food away from home indexes increased. The gasoline index rose 1.5 percent in February, following three consecutive monthly declines, resulting in the energy index rising 0.4 percent despite declines in the electricity and natural gas indexes.

Historically, the CPI-U general index tends to correlate over time with the CPI-U's food index. The current situation is putting upward pressure on the CPI.

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