Market Wrap – US Inflation misses

Risk on market sentiment increased during the US session after US CPI missed expectations on a monthly basis, while annual inflation dropped fairly significantly last month.

The CPI in the US increased 0.4% month-over-month in February of 2023, slowing from a 0.5% rise in January and matching market forecasts.

The index for shelter was the largest contributor but other upward pressure came from prices of food, recreation, household furnishings and operations, airline fares.

In contrast, energy prices decreased 0.6% as the natural gas –8%, the biggest decrease since October of 2006 and fuel oil both declined while gasoline prices were up 1%.

US core consumer prices, which exclude volatile items such as food and energy, rose by 0.5 percent from a month earlier in February 2023, following a 0.4 percent increase in January and above market expectations of 0.4 percent. The index for used cars and trucks and the index for medical care were among those that decreased over the month.

The annual inflation rate in the US slowed to 6% in February of 2023, the lowest since September of 2021, in line with market forecasts, and compared to 6.4% in January. Food prices grew at a slower rate while the cost of used cars and trucks continued to decline.

Also, costs slowed sharply for energy and fuel oil (with gasoline prices falling 2% after a 1.5% rise in January. On the other hand, prices rose faster for electricity and shelter.

Core inflation which strips out the cost of food and energy edged lower to 5.5% from 5.6%. Compared to the previous month, the CPI rose 0.4%, following a prior 0.5% gain and also matching forecasts.

The core rate, however, edged higher to 0.5% from 0.4%, compared to forecasts of 0.4%. Inflation in the US remains three times above the Fed’s target of 2%.