Inflation Remains Under 2%

Everyone was excited this morning. Would today be the day we finally see inflation reach 2%?  The answer, no.

The Consumer Price Index for All Urban Consumers increased as expected in February on a seasonally adjusted basis according to the U.S. Bureau of Labor Statistics reported today.

  • M-O-M: Month-over-month saw an increase of 0.4% in February on a seasonally adjusted basis after rising 0.3% in January.
  • ANNUALIZED: Over the last 12 months, the all items index increased 1.7% before seasonal adjustment.

So we still haven’t gotten to 2% yet, but 0.4% month-over-month is nothing to sneeze at.  Stanphyl Capital noted on Twitter, “0.4% month-over-month top-line CPI annualizes to a HUGE number.”

It’s important to note that energy was the biggest driver of the increase in the all items index.  The gasoline index saw a 6.4% jump in February and single-handedly accounted for over half of the seasonally adjusted increase.

  • Energy prices should slow down, but they are unlikely to drop.  As businesses fully reopen and travel takes off the demand for energy is unlikely to disspiate anytime soon.

On the housing front, annual rental inflation is at 1.5% and was up only 0.2% from January.

As Milton Friedman famaously said, ““Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”  Americans are sitting on 1.5 trillion in excess savings and we just passed a 1.9 trillion dollar stimulus bill.  It appears that we will find out if Milton Friedman was right very, very soon.