TO February inflation is higher than expected was largely driven by two components: shelter and gas.
The housing index rose 5.7% unadjusted annually and 0.4% month over month, a slowdown from January's 6% annual increase and 0.6% monthly increase.
Persistent housing inflation is largely to blame for higher core inflation readings, economists say.
The rental index and rental equivalent to owners (REA) increased by 0.5% and 0.4% monthly, respectively. Owners' equivalent rent is the hypothetical rent that a landlord would pay for the same property. In January, the rental index rose 0.4% while the REA rose 0.6%.
Seema Shah, global chief strategist at Principal Asset Management, highlighted that "while core services inflation was again high, core services excluding housing weakened from last month, while core services inflation housing decreased".
Shah said the disinflationary trend is positive, but warned that price pressures will ease "very gradually."
"This figure is enough to keep rate cut expectations stable for June, but another figure like this next month would push the first cut into the second half of the year, casting doubt on the soft landing narrative," the economist said.
Energy prices, largely responsible for the rise in overall inflation, rose after several months of declines, boosted by gas prices. The index jumped 2.3% in February after falling 0.9% in January. Still, in annual terms, the index fell 1.9%.
Gas prices rose a significant 3.8% from January to February after falling 3.3% the previous month. This was largely due to seasonality and a pull back in the use of refineries in the USA.
Other indices that rose in February included clothing, recreation and used cars and trucks.
The BLS noted that the airfare index rose 3.6% in February, following a 1.4% increase in January. The motor vehicle insurance index increased 0.9% during the month.
The food index rose 2.2% in February from a year ago, and food prices were stable from January to February. The food at home index also remained stable during the month after increasing 0.4% in January.
Eating out, however, rose 0.1% month over month after rising 0.5% in January.
