February’s 0.4% monthly increase is the highest since last summer.
By Manuel Gutierrez, Consulting Economist to NKBA
Consumer prices saw an accelerated increase in February, rising by 0.4% over January’s hike (Figure 1.) The rise tops those of the preceding four months.
In fact, as shown in Figure 1, the rate of increases has been higher each consecutive month since October, when prices rose just 0.1%.
The price inflation pattern mimics retail sales trends, which first rose sharply in May immediately after COVID-19 restrictions were eased. This was followed by more modest increases over the next few months until the pattern reversed after its October lows and began rising again.
Inflation will likely continue its upward bias over the next few months, as many consumers will spend at least some of their current round of COVID relief checks for retail goods and services.
However, the change in the overall Consumer Price Index masks differences in prices that occur among the numerous products purchased by consumers. Product prices change continuously as a result of a number of factors, such as strong or weak demand, product availability or shortages, changes in product characteristics, etc.
Figure 2 displays the changes in prices for a select number of major categories, which vary significantly.
For the latest month, shown in the left panel, they range from a high of 3.9% for energy, driven in part by changes in the government’s energy policies, to a 0.7% drop in apparel prices, which may reflect the ongoing hesitancy to shop in brick-and-mortar apparel stores based on COVID restrictions and concerns.
On an annual basis, shown in the right panel, overall prices have risen 1.7% from February 2020. Although this is lower than the 2.3% increase for the 12 months that ended in February 2020, the pace of annual price inflation has been gaining momentum since the middle of last year.
Price inflation in several categories has moderated over the past year, and in four categories, they are actually lower today than they were a year ago.
Leading with the largest decline is Transportation Services, down 4.4% from last year. This is followed by Financial Services, which is 4.2% lower, Household Windows & Floors, off by 3.8%, and finally Apparel, below last year by 3.6%.
On the flipside, Appliance prices are 7.2% above last year, with prices for Major Appliances, not shown in the chart, up by a concerning 12.9%. This has clearly had its effects on the K&B industry.
The inflation rate for all Housing products and services exceeds the overall inflation rate. Figure 3 displays the cumulative inflation rate since 2010 for all products, all Housing, and isolates several specific housing items as well.
The overall pricing trend for all products purchased by consumers, shown by the black line, is 21% higher today than it was in 2010, but that figure is 27% higher for Housingproducts and services — an increase that’s six points higher than the overall CPI.
The data collected by the Bureau of Labor Statistics identifies only three housing product categories used in homes, Appliances, Windows, and Flooring, all of which have seen price declines over the last decade. This clearly suggests that other housing-related items not broken out by the government are showing CPI increase trends that are significant.
What is known is that Household Electricity is 16% higher than in 2010, and Water & Sewer charges are a whopping 55% higher today than they were in 2010.
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