US consumer price gains accelerated in February on rising costs of gasoline, food and housing, and inflation was set to rise further after Russia’s invasion of Ukraine.
Labor Department data showed Thursday that the consumer price index jumped 7.9% a year earlier, after a 7.5% annual gain in January. The widely followed inflation gauge rose 0.8% in February from a month earlier, reflecting higher gasoline, food and shelter costs. Both readings match the average estimates of economists in the Bloomberg survey.
Excluding volatile food and energy components, so-called core prices rose 0.5% from a month ago and 6.4% from a year ago.
The data shows the extent to which inflation tightened its grip on the economy before Russia’s war, which included the highest retail gasoline price on record. Most economists expected February to be the peak for annual inflation, but the conflict will likely mean even more inflation prints in the months ahead.
“Inflation is not likely to roll back and subside for several months,” Michael Gapen, chief US economist at Barclays plc, said on Bloomberg television. As long as this struggle goes on and how disruptive the sanctions system really is.”
To combat building price pressure, the Federal Reserve is set to raise interest rates next week for the first time since 2018. Also, the geopolitical situation adds uncertainty to the central bank’s rate hiking cycle in the coming year.
Fed officials may take a more drastic stance if energy price shocks lead to higher and more persistent inflation, but they may take a more cautious stance if declining consumer sentiment and a fall in real wages weigh on growth. begins to escalate as the war progresses.
The February report showed that petrol prices increased by 6.6% over the previous month and accounted for almost a third of the monthly increase in the CPI. Some of them may reflect the rise in energy prices as a result of the first days of Russia’s invasion during the last week of the month. The impact will be captured more fully in the March CPI report.
So far this month, the retail price of regular-grade gasoline has risen 19.3% to $4.32 a gallon, according to data from the American Automobile Association.
Food prices rose 1% over the previous month, the biggest progress since April 2020, showed the CPI report. Compared to February last year, the jump of 7.9% was the biggest since 1981.
While the full impact of the war on the US economy is unclear, rising costs of oil, grain and metals are likely to feed through to other commodities and ultimately consumer prices. The Biden administration on Tuesday banned Russian oil imports into the US, a move that would add to energy price pressures.
actual earnings
As a result of a tight labor market, wage growth is not keeping up with inflation. Inflation-adjusted average hourly earnings fell 2.6% in February from a year earlier, the biggest drop since May and the 11th straight decrease, separate data showed Thursday.
The report showed that goods prices continued to rise in February, while the annual increase in the cost of services accelerated. On a year-on-year basis, goods inflation increased by 13%, the highest since 1980. This includes the largest ever annual increase in the prices of new cars and trucks.
The cost of services increased by 4.8% from a year earlier, the biggest advance since 1991.
Shelter cost – which is considered the more structural component of the CPI and accounts for about a third of the overall index – rose 0.5% from the previous month, the highest since November. Primary housing rents rose 0.6% on a monthly basis, the biggest advance since 1987.
Motor-vehicle repair costs rose a record 4.3% since January, and the index for personal care rose by an unprecedented 1.2%.
Hotel accommodation and airfare prices jumped in February after an Omicron-related pullback in economic activity in December and January.
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