Inflation spiked in February


Gasoline and rent led the increase

Sorry, Wall Street – inflation is still here so interest rates may stay higher for longer. But it’s consumers who are feeling the real pain.

The Labor Department’s Consumer Price Index (CPI) for February rose 0.4% in just one month, after rising 0.3% in January. Gasoline and shelter – mostly rent – accounted for 60% of the monthly increase.

The cost of shelter rose 0.4% in February and is 5.7% higher than 12 months ago. The monthly increase in gas prices was 3.8%. The only good news is that gas prices are down 3.9% from February 2023.

Including February’s numbers, the annual inflation rate is 3.2%, substantially lower than the peak at 9% but still higher than the Federal Reserve’s target of 2%.

Consumers might have noticed some improvement in February’s food prices. The index for food consumed at home – mostly grocery prices – was the same as January, the first time in years there hasn’t been a month-to-month increase.

More significantly, the index for food consumed away from home – mostly at restaurants – was also flat from January. Over the last 12 months, restaurant prices are up just 1%.

The cost of some food types declined

Three of the six major grocery store food group indexes decreased over the month. The index for dairy and related products decreased 0.6% in February, led by a 1.1% decline in the index for cheese and related products. The fruits and vegetables index fell by 0.2%, as did nonalcoholic beverages.

The index for cereals and bakery products rose 0.5% last month, following a 0.2% decrease in January. The meats, poultry, fish, and eggs index also increased over the month, rising 0.1%. 

In terms of restaurants, the index for full-service meals rose 0.1%, as did the index for limited-service meals. 

The report took many economists by surprise since it was expected that the Fed’s interest rate tightening had gotten inflation under control. And for many things, it has.

But gasoline prices tend to be volatile and the lack of affordable housing may continue to put upward pressure on rent and home prices.

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