US: CPI Inflation moderates only somewhat after strong January – Wells Fargo

According to analysts from Wells Fargo, US CPI reading in February back up a solid start of the year and they see the trend in inflation clearly moving upward.

Key Quotes: 

“Following a 0.5 percent increase in January, consumer price inflation moderated only slightly in February and advanced 0.2 percent. That pushed the one-year change in the CPI index up to 2.2 percent. Energy prices were only a small factor this month, up 0.1 percent. The small gain was driven entirely by higher costs for energy services as utility gas services rose nearly 5 percent. Gasoline prices were down 0.9 percent after seasonal adjustment. Food prices were flat as the 0.2 percent decline in food at home was offset by the same sized gain in prices for food away from home.”

“After the strongest monthly gain in 10 years, core inflation posted another solid print in February. Excluding food and energy, prices rose 0.2 percent. Goods prices rose for a third consecutive month (up 0.1 percent) largely due to another impressive gain in apparel prices. Apparel prices rose 1.5 percent on the heels of a 1.7 percent gain in January, making that the biggest two-month change in the index since 1990. A number of other major categories of core goods, however, fell over the month, including new and used vehicle prices and medical goods. Core services also moderated (up 0.2 percent) on slower growth in housing costs and flat prices for medical services, although the costs of transportation services picked up.”

“While tariffs have been in the limelight in recent weeks, we do not foresee them as becoming a significant driver of inflation unless measures escalate, and expect the FOMC to be similarly unfazed. Even without tariffs, however, the trend in inflation is clearly moving upward, which will likely affirm the FOMC’s plans to continue raising rates this year.”