NAA Inflation Tracker: March 2024

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CPI, Latest Release, February 2024  

February CPI numbers once again were hotter than expected. Headline CPI, up 3.2% year-over-year, is certainly showing signs of plateauing, with a tight range of 3.1%-3.3% for the past 5 months. Core CPI, on the other hand, continues to trend downwards, and at 3.8%, is at the lowest level since May 2021. But monthly figures continue to show stickiness, with both measures rising by 0.4%. Headline CPI was driven by shelter costs and gas prices, which were responsible for more than 60% of the monthly increase. 

consumer price index as of february 2024

CPI for Housing, February 2024 

The CPI includes two measures for shelter costs: owners’ equivalent rent (OER) and rent of primary residence, both of which are self-reported. Together, they comprise about one-third of CPI. Both measures were at the lowest rates of increase since summer 2022, with rent of primary residence dropping below 6.0% year-over-year. Month-on-month, rent was up 0.4% in February after briefly returning to the pre-2020 five-year average of 0.3% in January.   

cpi shelter costs as of february 2024

“Super Core” Inflation, February 2024 

Due mainly to lags in CPI shelter data, the Fed has begun to focus more on “super core” inflation, that is, prices excluding food, energy and shelter. Year-over-year, “super core” inflation rose 2.2%, the same increase logged for the prior two months. On a monthly basis, however, it experienced the highest increase in nine months at 0.3%. Airline fares, car insurance, apparel and recreation all contributed to February’s price increases. 

cpi less food, shelter, and energy as of february 2024

Inflation Expectations, February 2024 

The Fed tracks 21 different measures of inflation expectations. The data presented in the chart below are inflation expectations one year and five years from now, as measured by the University of Michigan’s Consumer Sentiment Index.  

One-year expectations ticked up slightly to 3.0%, unsurprising given recent increases at the gas pump. Five-year expectations remained at 2.9%. Both measures were in line with figures seen in 2018 and 2019, but another survey published by the Federal Reserve Bank of New York showed a substantial increase in 5-year expectations, from 2.5% to 2.9%, particularly prevalent among lower-income workers. 

inflation expectations 1 yr vs 5 yr

Wage Growth, February 2024 

Wage growth, as measured by average hourly earnings, remained sticky at 4.3% year-over-year. However, wages increased just 0.1% from January to February, the lowest monthly increase in two years. Wages for the financial activities sector, which includes the apartment industry, showed no signs of relief, increasing 0.6% monthly and 5.8% year-over-year. 

wage growth as of february 2024

What to Watch in the Next Month 

  • The next inflation report should shed some light on whether January and February numbers were exhibiting seasonality, given beginning-of-year price increases for many goods and services. 
  • The Fed meets on March 19-20, and is largely expected to keep interest rates at their current levels. The latest reading of the CME Fed Watch tool, updated this morning after the February inflation release, shows a 57% probability that the Fed will cut rates by 25 basis points in June. 


Next Tracker: April 10, 2024