Inflation gauge increased 0.4% in February, as expected and up 6% from a year ago

By Jeff Cox of CNBC.

Inflation still seems high, although there might be some good news here.

Recently I was optimistic that things would start getting better. See my Feb. 9 post The seasonally adjusted Consumer Price Index was up 0.94% in the last six months of 2022. Does this tell us anything about the next six months? That was before the Consumer Price Index (CPI) report came out for January. Now both Jan. and Feb. still seem high. It was up 0.5% in Jan. (that is seasonally adjusted).

I have more comments below including the the CPI with seasonal adjustments. But first some excerpts from the Jeff Cox article:

"The consumer price index increased 0.4% for the month [that is seasonally adjusted which I address below-CM], putting the annual inflation rate at 6%, the Labor Department reported Tuesday. Both readings were exactly in line with Dow Jones estimates.

Excluding volatile food and energy prices, core CPI rose 0.5% in February and 5.5% on a 12-month basis. The monthly reading was slightly ahead of the 0.4% estimate, but the annual level was in line."

"Shelter costs, which make up about one-third of the index’s weighting, jumped 0.8%, bringing the annual gain up to 8.1%. Fed officials largely expect housing and related costs such as rent to slow over the course of the year.

“Housing costs are a key driver of the inflation figures, but they are also a lagging indicator,” said Lisa Sturtevant, chief economist at Bright MLS. “It typically takes six months for new rent data to be reflected in the CPI. The quirk in how housing cost data are collected contributes to overstating current inflation.” [See my Feb. 28 post Apartment Rents Fall as Crush of New Supply Hits Market.]

Still, shelter costs accounted for more than 60% of the total CPI increase and rose at the fastest annual pace since June 1982.

Because of the housing expectations, Fed officials have turned to “super-core” inflation as part of their toolkit. That entails core services inflation minus housing, a cohort that increased 0.2% in February and 3.7% from a year ago, according to CNBC calculations [this may be the bright spot in the report along with the falling year over year inflation rate seen in the graph above-CM]. The Fed targets inflation at 2%."

If the CPI is up 0.4% for one month (as it was in Jan.) that is 4.9% for a 12 month period if it goes up exactly 0.4% each month since 1.004 raised to the 12th power is about 1.049. So that is still a pretty high rate of inflation. (Below I talk about how I actually got 0.37%)

The graph above shows that if we look at how much the CPI has changed in the last 12 months at any point in time, that has been going down lately. That is good news even if the rate is still high (at 6%).

The tables below show all the 12 month changes starting with January 2021. Table 1 has all the data for 2021. None of the numbers in the tables below are seasonally adjusted and they come from Consumer Price Index Data from 1913 to 2023. It looks like the graph from the Jeff Cox article uses numbers that are not seasonally adjusted even though the 0.4% increase for Feb is seasonally adjusted.

Table 1

Month	CPI 2020	CPI 2021	12 Mon. Ch.
Jan	257.971	261.582	1.40%
Feb	258.678	263.014	1.68%
Mar	258.115	264.877	2.62%
Apr	256.389	267.054	4.16%
May	256.394	269.195	4.99%
Jun	257.797	271.696	5.39%
Jul	259.101	273.003	5.37%
Aug	259.918	273.567	5.25%
Sep	260.28	274.31	5.39%
Oct	260.388	276.589	6.22%
Nov	260.229	277.948	6.81%
Dec	260.474	278.802	7.04%

The CPI in January 2021 (261.582) was 1.40% higher than the CPI in January 2020 (257.971). As you can see, the 12 month change just kept increasing during 2021. The Dec. 2021 CPI was 7.04% higher than the Dec. 2020 CPI.

Table 2 shows all the 12 month changes for 2022.

Table 2 

Month	CPI 2021	CPI 2022	12 Mon. Ch.
Jan	261.582	281.148	7.48%
Feb	263.014	283.716	7.87%
Mar	264.877	287.504	8.54%
Apr	267.054	289.109	8.26%
May	269.195	292.296	8.58%
Jun	271.696	296.311	9.06%
Jul	273.003	296.276	8.52%
Aug	273.567	296.171	8.26%
Sep	274.31	296.808	8.20%
Oct	276.589	298.012	7.75%
Nov	277.948	297.711	7.11%
Dec	278.802	296.797	6.45%

Things peaked in June. The CPI was 9.06% higher in June 2022 than it was in June 2021. It has continued to fall since then. Table 3 has the first two months of this year.

Table 3

Month	CPI 2022	CPI 2023	12 Mon. Ch.
Jan	281.148	299.17	6.41%
Feb	283.716	300.84	6.04%

We can see that the 12 month change has continued the downward trend. Good news, but it is still too high and the 0.4% gain for Jan. is still too high.

Now to the seasonally adjusted CPI.

See Consumer Price Index for All Urban Consumers: All Items in U.S. City Average from FRED (Federal Reserve Economic Data) compiled by the Research Division at the Federal Reserve Bank of St. Louis.

Here are the seasonally adjusted CPIs for the last 3 months from this FRED website:

Dec 2022)  298.990
Jan 2023)  300.536
Feb 2023)  301.648 

Jan. 2023 was 0.517% higher than Dec. 2022 (which would make for a 6.38% annual inflation rate).

Feb. 2023 was 0.37% higher than Jan. 2023 since 301.64/300.536 is 1.0037 (which would make for a 4.53% annual inflation rate). The article from Jeff Cox must be using the BLS report he links to that reports 0.4%. So they must have rounded the 0.37% to 0.4%. And if we go up 0.37% every month for 12 months we would get a 4.53% inflation rate.

Those are both too high.