The Commerce Department reported this morning that the core Personal Consumption Expenditures price index, that is after stripping out volatile food and energy prices, climbed 2.8% in February from a year earlier. That was a faster pace than in January. On a monthly basis, core prices ticked up another 0.4%, again faster than the monthly increase in January. The increases were more than economists had expected.
A further bit of news dashing hope that inflation is about to resume its retreat was that the rise was driven by a increase in goods prices. Until a couple of months ago, goods prices were consistently flat or negative, helping to bring inflation down.
Also in January, core services inflation–which has been source of stubbornly high price increases–rose 0.36%.
The headline or all items annual inflation rate came in at 2.5%.
Consumer spending for the month rose 0.4%, reversing a decline seen in January but falling short of what economists had forecast. Once adjusted for inflation, spending rose only 0.1%. Americans also increased how much money they are putting aside, with the personal saving rate rising to 4.6%.
“It shows some preliminary signs of stagflationary pressures,” Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, told Bloomberg. “This reinforces the narrative that growth may be becoming a little bit more sluggish even as inflation is starting to show some signs of perking up before we really get the brunt of the trade disruptions.”
