Econoday Economic Report: Consumer Price Index March 17, 2011

2011 Economic Calendar

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Consumer Price Index

Released On 3/17/2011 8:30:00 AM For Feb, 2011

	Prior	Consensus	Consensus Range	Actual
CPI - M/M change	0.4 %	0.4 %	0.3 % to 0.5 %	0.5 %
CPI - Y/Y change				2.2 %
CPI less food & energy	0.2 %	0.1 %	0.1 % to 0.2 %	0.2 %
CPI less food & energy - Y/Y change				1.1 %

Highlights
Prices pressures are rising at the headline level while the core remains on the warm side. The CPI in February jumped 0.5 percent, following a 0.4 percent boost in January. The latest came in higher than the median forecast for a 0.4 percent increase. Excluding food and energy, CPI inflation increased 0.2 percent, matching the rise in the prior month and topping expectations for a 0.1 percent advance.

Although the overall CPI was led upward by energy, food also played a major role. Energy surged 3.4 percent in February after increasing 2.1 percent in January. Gasoline jumped 4.7 percent, after increasing 3.5 percent the previous month. Also, heating oil spiked 4.1 percent, following a 5.4 percent hike in January. Food price inflation remained strong with a 0.6 percent increase, following a 0.5 percent gain in January. Five of the six major grocery store food groups posted increases. Notably, the index for fruits and vegetables increased the most, rising 2.2 percent as the fresh vegetables index increased 6.7 percent.

The core was led up by new vehicles, medical care, and airline fares. On the soft side was shelter which edged up marginally. The apparel index was one of the few to decline.

Year-on-year, overall CPI inflation increased to 2.2 (seasonally adjusted) from 1.7 percent in January. The core rate worsened to 1.1 percent from 0.9 percent on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 2.1 percent in February while the core was up 1.1 percent.

Overall, today's report points to a rise in underlying inflation pressures and normally would put upward pressure on interest rates. Flight to safety, however, remains strong.

Market Consensus before announcement
The consumer price index in January increased 0.4 percent, following a 0.4 percent jump in December. Excluding food and energy, CPI inflation in January posted at a 0.2 percent rise, compared December's increase of 0.1 percent. By major components, energy increased 2.1 percent after jumping 4.0 percent in December. Gasoline rose 3.5 percent, after spiking 6.7 percent the previous month. Food price inflation picked up the pace to 0.5 percent from 0.1 percent in December. The firming in the core rate was led by a 1.0 percent jump in apparel and 2.2 percent boost in airline fares.

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

2011 Release Schedule

Released On: 1/14 2/17 3/17 4/15 5/13 6/15 7/15 8/18 9/15 10/19 11/16 12/16

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