In its monthly report of the Consumer Price Index, a measure of a basket of goods and services purchased by consumers considered by economists as a broad gauge of inflation, the Labor Department said that the CPI rose by 0.7 percent in February, outpacing economist predictions of a 0.5 percent rise in prices. It was the largest one-month move since June of 2009. The hike in gas prices, a volatile component of the index, was accounted for about 75 percent of the increase in the all-items index. Gas prices had contracted by 3.0 percent in January.
The energy index as a whole increased 5.4 percent for the month while the food index inched up by 0.1 percent, lead by a spike in fruit and vegetable prices.
Compared to February 2012, the CPI was up by 2.0 percent, following a 1.6 percent year-over-year increase in January.
Economists tend to look more towards the so-called “core” CPI, which excludes the volatile food and energy sectors, to get a better read on inflation. The core CPI increased 0.2 percent in February, in line with what economists expected and giving little reason for the Federal Reserve to put much concern into the overall CPI jump for the month when they meet next week to discuss the state of the economy and fiscal policies.
In the past twelve months, the core CPI has increased 2.0 percent. The energy index is up by 2.3 percent and the food index has risen 1.6 percent, all figures basically in line with the Fed’s target range.
The longer term trends of the CPI are relatively benign and don’t offer much reason for the Fed to change its $85-billion-per-month bond buying program even with recent data showing the labor market is strengthening.
The Dow Jones is not starting the day with signs that its historic 10-day run will make it to an 11th day in early trading, nor that the S&P 500 will break through to all-time highs on Friday. In early morning action, the Dow is off by 36 points, the S&P 500 is lower by 3 and the Nasdaq is essentially flat.