Brief CPI Feb 2023 Update

The Consumer Price Index (CPI) report just came out for the US today. The market seems to like the report somewhat and I can see why.

Here’s the overall CPI Scorecard

The only item that came in above consensus was Month on Month CPI Ex Food and Energy, or Core CPI as it is known.

A brief look under the surface:

Energy inflation was the biggest driver of the decrease.

Shelter is the only thing that came in slightly hot, with the month on month increase accelerating.

Used Cars came in lower than expected. I thought this number would be higher because the Manheim Used Car Index has been accelerating over the last few months. However, the CPI does lag the Index by about 2-3 months so the worst may not be over.

I don’t particularly like the numbers for food. While the rate of change has decreased, the change is still positive. This just means it will take much longer for inflation in this area to come down, as you can see from the last two columns.

Nevertheless, I'd say the report shows decent progress in reducing inflation. This may not however, mean that the Fed pauses rate increases. It may just mean that they continue hike at 0.25%.

Have great day!