Consumer Price Index: More cooling

The Consumer Price Index for February 2023 showed the following:

On an annual basis, inflation rose 6% from February 2022. That’s down from 6.4% in January, continuing a downward motion in prices.

On a monthly basis, prices increased 0.4%, which was down slightly from the 0.5% increase in January.

Core inflation, which leaves out volatile food and energy prices, rose 5.5% year-over-year, down only slightly from 5.6% in January. On a monthly basis, core inflation was up 0.5%.

Food inflation dipped below 10% for the first time in months, registering at 9.5%. Food at home, which includes grocery, was 10.2%, compared with 11.3% in January. Five of the six major grocery indexes increased on the month.

Snacks brought a rare decrease in the food category, falling 0.9% for the month.

Shelter continues to be the driver of inflation. The shelter index increased 0.8% for the month, and 8.1% for the year.

Among consumer goods categories, CPI showed the following:

• Household furnishings and operations increased 0.8 percent for the month
• Apparel increased 0.8%, both for the month and annually.
• Toy prices increased 1.6%.

What’s the takeaway?

The report brought the latest sign that growth of the headline inflation reading was slowing. This trend now dates to October 2022. However, there continues to be plenty of signs that inflation is remaining stubborn on the way down. Shelter inflation is particularly high, and only rising. Electricity was up 12.9%. Meanwhile, core inflation's rise only inched down. Inflation continues to be a presence for consumers, which means elevated prices could continue to lead to cutbacks in discretionary spending.

After months of high inflation, consumers are increasing credit card balances and dipping into savings as they seek to make ends meet, said GlobalData Managing Director Neil Saunders.

“On the surface, these adjustments have allowed the consumer economy to remain resilient in the face of persistent inflation,” Saunders said. “However, under the surface there are cracks: behaviors among the lowest income households have changed sharply, reduced volumes are putting pressure on many retail and consumer businesses, and the financial position of many households is deteriorating. In short, inflation is not an enemy that consumers can withstand indefinitely.”

Digital deflation

The Adobe Digital Price Index showed a deflationary motion for February, indicating that ecommerce prices are coming down even as the wider economy still sees prices rising.

Overall, the DPI showed online inflation falling 1.4% year-over-year, and 0.3% on a monthly basis. It was the sixth straight month that annual prices decreased.

Digging further into the data, 10 out of 18 categories showed decreases. Notable categories included:

Electronics fell 12.6% year-over-year, and 1.7% month-over-month. This continues notable drops in electronics prices, even after holiday season discounting has long since been completed.

Toys fell 6.5% year-over-year, and 0.4% month-over-month.

Home and garden products fell 3.8% year-over-year, while rising 0.2% monthly.

Furniture and bedding prices fell for the first time in 33 months, down 0.1% year-over-year and 0.6% monthly. “Consumers have become increasingly comfortable buying furniture online, after a pandemic where many wanted to spruce up their living spaces and had no choice but to tap ecommerce,” Adobe states.

Price increases are also slowing in categories that have shown more stubborn inflation.

Grocery prices cooled for the fifth straight month. They rose 11.4% year-over-year, but that was down from a 12.6% increase in January. This is the rare digital category that moves in concert with the Consumer Price Index. That’s because more people are buying groceries online, and when they do, they are ordering mostly from the same grocery stores where people shop in person.

Apparel prices were up 5.1% year-over-year, which is down notably from 16.7% in February of 2022.

Tools and home improvement are also coming down. The increase was 6.2% year-over-year, falling from 8.3% in December.

Check out the full category breakdown below: