Inflation Rate Eases to 6% Year-over-Year Increase in February
The U.S. Bureau of Labor Statistics (BLS) reported that the consumer price index (CPI) rose 6% year over year in February, slightly down from 6.4 % in January. This is the eighth consecutive month the CPI has declined and marks the lowest reading since September 2021. As such, the CPI increase was in line with predictions as it’s slowly but steadily declining.
The shelter index was the most significant contributor in February, accounting for 70% of the month’s CPI gains. In fact, the BLS reported that housing prices jumped by 8.1% in the past year. Additionally, food prices continued to wane as groceries were at their lowest (up 10.2%) since March 2022. Some of the categories with notable declines for the month included utility gas service (8.0%), fuel oil (7.9%), eggs (6.7%) and used vehicles (2.8%).
A new buzzword used by the Federal Reserve (Fed) and economists is “supercore inflation,” which describes the measuring of prices to better assess the financial situation. It focuses on the prices of common services but excludes housing, food and energy prices. While the CPI is sourced from consumers, supercore inflation prices are sourced from businesses. In February, the supercore inflation increased slightly (0.2%)—4% higher than one year ago. The Fed’s target is 2%. As the supercore inflation remains elevated, here’s how much services increased in February:
Package delivery: 14.4%
Pet-related services: 10.5%
Hotels and motels: 7.4%
Trash collection: 6.9%
Laundry: 6.8%
Dental services: 6.6%
Haircuts: 4.8%
Since wages generally drive the cost of services, rising costs could keep inflation elevated for months.
What’s Next?
A positive but declining inflation rate doesn’t mean consumer prices are falling, but it does signal that the cost of items is increasing more slowly. While the decline is encouraging news, it’s not likely to discourage an interest rate hike at the Fed meeting next week.
It remains to be seen how quickly inflation will go away, and a complete inflation deceleration could still be a long process. Individuals should continue to monitor the economy and associated inflation trends, adjusting their financial habits accordingly. They can also check with their employers for financial wellness benefits and related resources.
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