Econoday Economic Report: Consumer Price Index March 16, 2012

2012 Economic Calendar

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Consumer Price Index

Released On 3/16/2012 8:30:00 AM For Feb, 2012

	Prior	Consensus	Consensus Range	Actual
CPI - M/M change	0.2 %	0.5 %	0.3 % to 0.6 %	0.4 %
CPI - Y/Y change	2.9 %			2.9 %
CPI less food & energy	0.2 %	0.2 %	0.1 % to 0.2 %	0.1 %
CPI less food & energy - Y/Y change	2.3 %			2.2 %

Highlights
In February, CPI inflation accelerated at the headline on higher energy costs. The core rate, however, eased. The consumer price index rose 0.4 percent, following a 0.2 percent gain in January. Market expectations for the headline number were for a 0.5 percent boost. Excluding food and energy, the CPI edged up 0.1 percent, following a 0.2 percent increase in January. Analysts projected a 0.2 percent rise.

Turning to major components, energy jumped a monthly 3.2 percent, following a 0.2 percent rise in January. Gasoline spiked 6.0 percent after a 0.9 percent increase the month before. Food price inflation posted at zero, following a 0.2 percent gain in January.

Within the core, indexes for shelter, new vehicles, medical care, and household furnishings and operations all advanced, while indexes for apparel, recreation, used cars and trucks, and tobacco all declined.

Year-on-year, overall CPI inflation came in at 2.9 percent, holding steady with January's pace (seasonally adjusted). The core rate nudged down to 2.2 percent from 2.3 percent on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 2.9 percent in February, matching January's pace. The core was up 2.2 percent versus 2.3 percent in January, not seasonally adjusted.

The February CPI was mixed in terms of the headline number accelerating and the core number softening. While the Fed's latest meeting statement indicated that the Fed believes the energy related boost to inflation is temporary, there is a reasonable probability that is open to debate as long as tensions in the Middle East remain.

There was little reaction in markets to the CPI report at release.

Market Consensus before announcement
The consumer price index in January rose 0.2 percent, following no change in each of the prior two months. Excluding food and energy, the CPI firmed to a 0.2 percent increase from December's 0.1 percent increase. Energy rose only 0.2 percent, following a 1.3 percent decrease in December. Food price inflation held steady at 0.2 percent. Within the core, upward pressure came from apparel, recreation, tobacco, and medical care. In contrast to these increases, the index for used cars and trucks declined for the fifth month in a row and the index for airline fares dipped in the latest month.

Definition
The Consumer Price Index is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. That is the index shows the change in price levels since the index base period, currently 1982-84 = 100. Monthly changes in the CPI represent the rate of inflation. Why Investors Care

It is always a good idea to look at more than a few months of data to get a sense of changes in established trends. Monthly changes in the CPI are mainly volatile because of sharp fluctuations in food and energy prices. The core CPI eliminates the sharper fluctuations.
Data Source: Haver Analytics

Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core CPI does not fluctuate as much as the total CPI.
Data Source: Haver Analytics

2012 Release Schedule

Released On: 1/19 2/17 3/16 4/13 5/15 6/14 7/17 8/15 9/14 10/16 11/15 12/14

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