United States: Inflation inches up in February; core price growth remains stable
March 13, 2018
Consumer prices rose 0.2% from the previous month in February, coming in below the buoyed 0.5% increase recorded in January. The figure met market analysts’ expectations for the month and reflected a pullback in energy prices to a 0.1% expansion in February from a 3.0% month-on-month increase in the previous month. Food prices were unchanged from the previous month, below the 0.2% increase recorded in January. Inflation moved up one tick to 2.2% in February from 2.1% in January.
Core consumer prices, which exclude volatile items including food and energy prices, increased 0.2% from the previous month in February, a notch below the 0.3% increase registered in January but in line with market expectations. A second consecutive surge in apparel prices—largely reflecting a reversal from holiday discounts in preceding months—and solid growth in vehicle insurance charges buttressed the figure. These offset stagnant growth in medical care prices and lower charges for both new used vehicles, a sign that post-hurricane demand for cars has begun to reverse. Shelter prices rose 0.2% again in February. Core inflation was unchanged at January’s 1.8% in February, below the Federal Reserve’s 2.0% target.
Core inflation is expected to trend higher in March as a negative base effect on cell phone data pricing dissipates; in March of last year, new contracts drove down communication prices, an effect that has kept a lid on core price growth. Against a backdrop of soon-to-accelerate inflation, the Federal Reserve is widely expected to increase the Funds rate at the upcoming FOMC meeting in March, particularly following February’s sizeable upside surprise to employment growth. The move is largely expected by FocusEconomics panelists.
United States Inflation Forecast
FocusEconomics Consensus Forecast participants expect inflation to average 2.3% in 2018, which is up 0.1 percentage points from last month’s forecast. For 2019, the panel also expects inflation to average 2.2%.
Author: David Ampudia, Economist