CPI Surges: Inflation Hits 3.2%, Highest Since August, Sparking Economic Concerns

CPI Surges: Inflation Hits 3.2%, Highest Since August, Sparking Economic Concerns 

Following January's unexpected rise, expectations for a substantial month-over-month increase in headline CPI have been adjusted upwards over the past month. However, even with the anticipated 0.4% month-over-month increase in headline CPI (matching the highest since August), the year-over-year CPI surged to +3.2%, surpassing the 3.1% expectation.

The three-month annualized CPI rate rose to 2.8% from 1.9%, while the six-month annualized core rate dropped slightly to 3.2% from 3.3%. Energy costs saw a month-over-month surge, while core services inflation slowed.

The breakdown of the full CPI month-over-month includes various sectors experiencing increases. Notably, the shelter index, driven by rent and owners' equivalent rent, saw a significant rise. However, the medical care index remained unchanged, and the household furnishings and operations index saw a slight decline.

On a year-over-year basis, the index for all items less food and energy rose by 3.8%. Shelter inflation, accounting for a significant portion of the core CPI increase, decreased slightly from January. Other indexes with notable increases over the year include motor vehicle insurance, medical care, recreation, and personal care.

Core CPI rose by 0.4% month-over-month, surpassing expectations, and increased by 3.8% year-over-year. The three-month annualized core CPI rate rose to 4.1% from 3.9%, and the six-month annualized core rate increased to 3.8% from 3.5%.

Goods deflation continued but flattened out, while services inflation remained high. The SuperCore index, excluding shelter, experienced a significant increase month-over-month and year-over-year.

Consumer prices have not declined since President Biden took office, contributing to an overall increase of 19% since then. Real wage growth has lagged behind, with food costs up over 21% since Biden's term began, compared to non-supervisory wages up only 18%.

The market narrative of slow disinflation has been disrupted, leading to questions about potential future economic trends.