Inflation Watch: Year-over-Year Headline and Core CPI Little Changed

The Bureau of Labor Statistics released the CPI data for last month this morning. Year-over-year Headline CPI came in at 2.87%, which the BLS rounds to 2.9%, down fractionally from 2.93% last month. Year-over year-Core CPI came in at 2.18%, which the BLS rounds to 2.2%, down from 2.28% last month, which BLS rounded to 2.3%. Energy is up 6.97% YoY.

Here are excerpts from the BLS summary: The gasoline index rose sharply in February, accounting for over 80 percent of the change in the all items index. The gasoline increase led to a 3.2 percent rise in the energy index despite a decline in the index for natural gas. The food index was unchanged in February, with the food at home index unchanged for the second month in a row as major grocery store food indexes were mixed.

The index for all items less food and energy rose 0.1 percent in February after increasing 0.2 percent in January. Indexes for shelter, new vehicles, medical care, and household furnishings and operations all advanced, while indexes for apparel, recreation, used cars and trucks, and tobacco all declined.

The all items index has risen 2.9 percent over the last 12 months, the same figure as last month. The index for all items less food and energy was up 2.2 percent, a slight decline from last month's 2.3 percent figure, while the 12-month change in the food index fell to 3.9 percent in February, its lowest level since last June. In contrast, the 12-month change in the energy index was 7.0 percent in February compared to 6.1 percent in January.  More...

The Briefing.com consensus forecast for 0.4% for Headline and 0.2% Core month-over-month was was spot on.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since 1957. The second chart gives a close-up of the two since 2000.

On this chart, I've highlighted the 1.75% - 2% range, which is generally understood to be the Fed's target for core inflation. Here we see more easily see the widening spread between headline and core CPI since late 2010, a pattern that began changing last October as headline inflation declined while core has continued to rise.

Federal Reserve policy, which focuses on core inflation, and especially the core Personal Consumption Expenditures (PCE), will see that the latest core CPI is continuing to reside above the target range.