AIER Everyday Price Index up 0.67% in February 2023

After rising 0.93 percent in January 2023, the Everyday Price Index (EPI) rose 0.67 percent in February 2023. At 282.6 (1987 = 100), the AIER index is at its highest level since July 2022 (285.4). Among the EPI components, cable, satellite television and radio services, prescription drugs, and tobacco and smoking products accounted for the largest monthly gains. The biggest declines were in fees for recreational lessons and instruction, home services, home fuel, and utilities.

The US Consumer Price Index (CPI), released by the Bureau of Labor Statistics this morning at 8:30 am ET, reported a 0.4% increase from the previous month, in line with expectations. The core consumer price index (on a monthly basis) was one tenth of a percent higher than expected and amounted to 0.5 percent. Both the annualized headline CPI and the annualized core CPI met expectations of 6.0 percent and 5.5 percent, respectively. The EPI AIER index rose by 6.6% over the same time period (February 2022 to February 2023).

February 2023 U.S. General and Core CPI Monthly (2013–present)

Among the components that contributed to the rise in the core CPI index, housing, leisure, household items and air travel were the most notable. Some relief in February came with the smallest cut in food prices since May 2021. Symbolic of price spikes, egg prices fell 6.7% in February 2023. Prices for used cars decreased by 13.6% compared to the same period last year. basis, the largest decline in this component of the CPI since 1960.

Housing-related spending rose 0.8% in February, up 0.7% in January. Rent and owner’s rent equivalent increased by more than 8 percent year-over-year, a record increase. However, shelter numbers can be misleading, as they are delayed. Recent data suggests that costs are starting to come down in the housing category.

February 2023 U.S. General and Core CPI Annualized (2013-present)

As was the case for January 2023, the EPI AIER shows a larger monthly increase in household spending than either the overall or core CPI figures show.

The Fed’s policy path is undoubtedly more hazy than even a few days ago due to financial stability concerns. As early as last week, the March 21-22 FOMC meeting considered raising the target federal funds rate by 50 basis points as a real possibility. However, the collapse of Silicon Valley Bank and Signature Bank of New York over the weekend significantly increased the likelihood of a 25 basis point upswing or suspension of the Fed’s ongoing cuts. Two weeks ago, on March 1, 2023, six-month market implied policy rates (MIPR) hit cap rates at 5.52 percent. Following this morning’s release of the CPI and in light of worries about the health of the US banking system, that estimate fell to 4.81 percent, indicating expectations of a one-quarter point rate hike through September 2023. The path to rebounding to 2% annual inflation target has likely become longer in light of recent developments.