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January saw a 5.7 percent increase in gasoline prices, which then eased by 0.9 percent in February.

February 2018 Consumer Price Index, Business Optimism

March 13, 2018
By Robert A. Dye, Ph.D., Daniel Sanabria

Gasoline Prices Ease in February, Dampening Inflation, Biz Optimism High

  • The Consumer Price Index for February increased by 0.2 percent and is up 2.2 percent for the year.
  • Core CPI also gained 0.2 percent for the month, and was up 1.8 percent over the previous 12 months.
  • The Index of Small Business Optimism increased in February to its second highest level in 45 years.

The Consumer Price Index for February gained a moderate 0.2 percent after a hot 0.5 percent increase in January. Over the previous 12 months, the headline CPI is up by 2.2 percent. Energy prices have been volatile this winter. January saw a 5.7 percent increase in gasoline prices, which then eased by 0.9 percent in February. The overall energy price sub-index gained a tenth of a percent in February as consumer natural gas prices increased. Overall food prices were unchanged in February. Excluding food and energy, core CPI also gained 0.2 percent in February and is up by 1.8 percent over the previous 12 months. Today’s CPI report for February does not materially change the odds of a fed funds rate hike coming on March 21. According to the CME Group’s Fed Funds Futures Market, the implied probability of a 25 basis point fed funds rate hike coming on March 21 is up to 86 percent.

The National Federation of Independent Business’s Small Business Optimism Index increased by 0.7 points in February, to 107.6, which is the second highest reading in the indexes 45-year history. Survey results show that taxes received the fewest votes since 1996 as the number one business problem. The biggest problem cited by survey respondents in February was finding qualified workers. Also noteworthy was the number of respondents reporting compensation increased at their companies, the highest level since 2000. Interestingly, 32 percent reported that all their credit needs were met, and 51 percent said that they were not interested in getting a loan, leaving only 17 percent of businesses, roughly 1 out of 5, interested in new loans. Only 2 percent of all companies reported that financing was their top problem. So, while business is good, the demand for new money is subdued, according to the NFIB survey.

Market Reaction: U.S. equity markets opened are mixed. The 10-Year Treasury bond yield is down to 2.86 percent. NYMEX crude oil is down to $60.44/barrel. Natural gas futures are up to $2.78/mmbtu.

For a PDF version of this report click here: CPI-021418.

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