(March 14, 2008) – The BLS released the Consumer Price Index: February 2008 report this morning, showing the CPI-U (All Urban Consumers) increased 0.3% in February, before seasonal adjustment, and 4.0% year-over-year. The CPI-W (Urban Wage Earners and Clerical Workers) increased 0.2% in February before seasonal adjustment, 4.4% higher than a year earlier.
On a seasonally adjusted basis, the CPI-U was virtually unchanged in February, following a 0.4% rise in January. Each of the three groups–food, energy, and all items less food and energy–slowed. The index for food at home, which rose 0.9% in January, increased 0.3%. The index for energy turned down in February as a 1.9% decline in the index for energy commodities more than offset a 1.7% increase in the index for energy services. The index for all items less food and energy was virtually unchanged after increasing 0.3% in January.
Don’t get too comfortable with these low numbers. Oil prices in March have gone through the roof. The March report will not be so good.
One final thought. More than half of the basket of goods used to measure the CPI consist of services. Services do not perform well as a store of value. That means the CPI is not a useful measure of inflation when thinking about the impact of inflation on interest rates. For that purpose we need to focus on the prices of storable real assets with low physical depreciation rates–existing stocks of commodities homes and land.