Published: Thu, March 15, 2018
Money | By Hannah Jacobs

U.S. consumer prices slow in February; rents moderate

U.S. consumer prices slow in February; rents moderate

The Food Index increased by 17.59 percent (year-on-year) in February, down by 1.33 percent points from rate recorded in January 2018 (18.92) percent.During the month, all major food sub-indexes increased.

The Labor Department says the consumer price index increased 0.2 per cent last month, after a sharp 0.5 per cent gain in January.

Excluding food and energy costs, the core PPI also rose 0.2% in February and increased 2.5% over the past 12 months.

The core gauge rose less than in the prior month despite apparel costs, which helped drive the outsize gain in January, advancing 1.5% in February following a 1.7% increase.

A report released by the Labor Department on Tuesday showed consumer prices in the USA increased in line with economist estimates in the month of February.

She said this also raises a question for the Federal Reserve: If inflation is not rising, but how the forces of tax cuts, spending increases and now tariffs will lift inflation, how quickly the Fed should raise interest rates in response?

Ramped up inflation could cause the Fed to pick up the pace of interest rate increases this year.

Federal Reserve Bank of Boston President Eric Rosengren recently said he expects "that it will be appropriate to remove monetary policy accommodation at a regular but gradual pace-and perhaps a bit faster than the three, one-quarter point increases envisioned for this year in the assessment of appropriate policy from the December 2017 [Federal Open Market Committee] meeting". Producer prices, which show inflation before it reaches consumers, have risen 2.8 percent over the past year. Policymakers consider the labor market to be near or a little beyond full employment.

In men's, price increases of 4.3% in shirts and sweaters and 1.2% in trousers and shorts were partially offset by decreases of 0.8% in furnishings and 0.2% in the suits, sport coats and outerwear group.

This pushed down the annual rate of increase in the Producer Price Index (PPI) to 2.8% from 3.1% in January. The Labor Department reported Tuesday that consumer prices rose just 2.2 percent over the past year. The NFIB survey also showed almost a third of owners reported raising compensation to retain or attract workers last month, the largest share in more than 17 years.

The inflation-adjusted hourly rate of pay reported growth of 0.4% yoy against a 0.7% rise in January. Over shorter horizons, the core CPI has accelerated. Its positive correlation with the core CPI suggests that this measure would remain below the Fed's 2.0% inflation target when the February numbers are released. In particular, apparel prices rose 1.5% in February. Prices for new motor vehicles fell 0.5 percent, the biggest drop since August 2009, after slipping 0.1 percent in January. In contrast, the indexes for communication, new vehicles, medical care, and used cars and trucks declined over the month.

The result was a 2.2% increase in the overall Consumer Price Index (CPI) over the past year, up slightly from January's year-ago level. Spot prices on U.S. cotton averaged 80.48 cents per pound for the week ended March 8, the highest weekly average since May 2014, when the average was 82.11 cents a pound, according to the U.S. Department of Agriculture.

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