MACRO: US inflation - what to look for?

• US inflation rate highest since February 2020
• Core CPI below expectations

Annual inflation rate in the US increased to 1.7% last month from 1.4% in January, in line with analysts expectations  of 1.7%. It is the highest rate since February of 2020 with main upward pressure coming from energy cost (3.7% vs -3.6% in January), namely gasoline (1.6% vs -8.6%), electricity (2.3% vs 1.5%) and utility gas service (6.7% vs 4.3%). Prices of medical care services also increased slightly more (3% vs 2.9%). On the other hand, prices slowed for food (3.6% vs 3.8%), used cars and trucks (9.3% vs 10%), shelter (1.5% vs 1.6%) and new vehicles (1.2% vs 1.4%) and cost of apparel fell more (-3.6% vs -2.5%). On a monthly basis, consumer prices rose 0.4%, also in line with expectations as gasoline went up 6.4% and accounted for over half of the increase. Meanwhile annual core inflation came in below forecasts at 1.3%. 

However today's reading needs to be taken with a pinch of salt as the BLS  said that "data collection in February was affected by the temporary closing or limited operations of certain types of establishments. These factors resulted in an increase in the number of prices considered temporarily available and imputed". Anyway in a broader context, today's data is not very significant. The wider picture of inflation and the effects of the actions taken by the US government and the Fed will not be visible until April, when the Americans will cash their new checks and the economy will open even more. In addition, analyzing the data from last year, it can be observed that in February 2020 the core inflation was 2.36% and it was at its peak, while in June 2020 it was only 1.19%. As it is easy to calculate from the base effect alone, inflation should rise above 2%. The fact is that if we look at changes in core inflation on a monthly basis, we can see that it is still at low levels compared to recent years. Still, this is not the most important issue. In the future, it will be crucial to assess to what extent the checks and reopening of the economy will allow companies to pass costs on consumers.