The US consumer price index rose 7.9% in February against forecasts of 7.8%, the biggest annual increase since January 1982. The greatest contribution to the growth of inflation was made by the rise in prices for gasoline, food, and housing. Economists give their forecasts for the future.
Stock futures were relatively muted ahead of Friday’s session, though the Dow Jones Industrial Average looked set for its fifth losing week in a row as talks to end the war in Ukraine failed and US inflation data set a new negative record as expected.
After jumping 7.5% in January, US consumer goods prices jumped 7.9% in February from a year earlier. This is above the average economists' forecast of 7.8% and is the largest annual increase since January 1982.
Sanctions against Russia for the war in Ukraine have also contributed to the ongoing rise in oil and gasoline prices.
Energy prices rose 25.6% from 27% in January, while gasoline prices rose 38% (40% in January).
Gas station prices have risen about 24% in the last month and 53% in the last year, according to AAA (the public service of the US's largest automotive and travel organization).
Inflation accelerated in February in housing (4.7% vs. 4.4%) and food (7.9% vs. 7%), the highest since July 1981.
Vehicle prices were still a powerful inflationary force, but there were signs of easing in February. Used car and truck prices were actually down 0.2%, their first negative reading since September 2021, but still up 41.2% year-over-year. New car prices rose 0.3% on the month and 12.4% over the 12-month period.
The so-called core consumer price index (core inflation), which excludes volatile energy and food indexes, slowed slightly over the month, climbing 0.5% in February from 0.6% a month earlier. But for the year it rose by 6.4%, the fastest annual growth since August 1982. The data shows that housing and rent expenditures were by far the biggest driver of core CPI growth.
At the same time, according to the US Bureau of Labor Statistics, wage growth lags behind inflation. In February 2022, inflation-adjusted real average hourly wages fell 0.8% for the month, contributing to a 2.6% decline year-on-year.
The opinion of analysts and economists
The market is looking forward to a widely announced Federal Reserve reaction to inflation next week on March 15-16.
The Fed is expected to announce the first of a series of rate hikes aimed at slowing inflation. This will be the first time the central bank has raised rates in more than three years, and it will mark the end of a zero interest rate policy and an unprecedented level of cash injections for an economy that grew at its fastest pace in 37 years in 2021.
Analysts predict that the growth of inflation will continue in the medium term, as the increase in rates will not have an immediate effect. In addition, Fed Chairman Powell recently spoke about the uncertainty factor due to the war in Ukraine, which creates difficulties for decision-making by the central bank.
The war in central Europe is putting pressure on prices in both the energy and food sectors (Ukraine and Russia export a third of the world's wheat).
On Thursday, the European Central Bank said it would not change its benchmark interest rate but would end its own asset purchase program earlier than planned.
"Consumers are likely to cut spending this spring and summer as inflation outpaces their income growth," said Bill Adams, chief economist at Comerica Incorporated. “They were very unhappy with inflation even before the Russian-Ukrainian war, and the current rise in food and energy prices is likely to cause concrete changes in the budgets of the population.”
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