February's better-than-expected inflation record was driven primarily by two factors: shelter and gas.
The shelter index rose by 5.7% on an unadjusted annualized basis and by 0.4% month-on-month, slowing down from January's 6% annualized increase and 0.6% month-on-month increase.
Economists say the rise in core inflation is mainly due to sticky shelter inflation.
The rent index and owner equivalent rent (OER) increased by 0.5% and 0.4% from the previous month, respectively. Owner's equivalent rent is the hypothetical rent that a homeowner would pay for the same property. In January, the rent index increased by 0.4% and the OER increased by 0.6%.
Seema Shah, chief global strategist at Principal Asset Management, said: “While core services inflation was high again, vital core services excluding housing have been weak since last month, while shelter inflation has been weak. “There has been a slight decline,” he said.
Shah warned that while the disinflationary trend is positive, price pressures will subside “very gradually.”
The economist said: “This print is almost enough to stabilize expectations for a rate cut in June, but another print like this next month could push the first rate cut into the second half of the year, ending the story of a soft landing. It raises questions,” he said.
Energy prices rose after months of decline, mainly due to higher headline inflation, supported by gas prices. The index rose 2.3% in February after falling 0.9% in January. Still, on a yearly basis, the index fell 1.9%.
Gasoline prices rose sharply by 3.8% from January to February after falling 3.3% the previous month. This is primarily due to seasonality and lower U.S. refinery utilization.
Other indexes that rose in February included apparel, recreation, and used cars and trucks.
The BLS noted that the airfare index rose 3.6% in February, following a 1.4% increase in January. The automobile insurance index increased by 0.9% from the previous month.
The food index in February increased by 2.2% compared to last year, and food prices remained flat from January to February. The eating-at-home index also remained stable throughout the month after increasing by 0.4% in January.
On the other hand, non-home groceries rose 0.1% month-on-month after rising 0.5% in January.
Please see here for the detail.
