Inflation Slows Further in February
What happened: The Consumer Price Index (CPI) rose 0.4% in February after increasing 0.5% in January. Core CPI rose 0.5% month-over-month.
What it means: Although consumer prices are still 6% higher when compared to a year ago, the pace of price increases slowed further in February. However, shelter costs continued to hold back ongoing disinflation – accounting for 70% of the February price gains.
What Zillow Senior Economist Orphe Divounguy thinks: Consumer price growth is slowing, but inflation remains high. The shelter component of CPI led the price gains in February, accounting for more than two-thirds of the increase.
While the latest inflation data is another step in the right direction, this news will likely take a backseat to the events of the past week: recent stress on the banking system caused by the collapse of Silicon Valley and New York Signature Banks.
Heightened uncertainty is disinflationary since it causes economic actors to pull back on spending, investing and run to safety.
Longer term yields – including mortgage rates – are declining. Mortgage rates are now nearly 50 bps lower than they were only a week ago. When mortgage rates fell in January, housing sales ticked up slightly above normal for that time of the year. Home buyers are stretched thin when it comes to affordability and even a small improvement would support housing market activity this spring.
Numbers to know:
- The Consumer Price Index (CPI) increased 0.4% in February after increasing 0.5% in January. Consumer prices were 6.0% higher when compared to a year ago down from 6.4% in January.
- Core CPI increased 0.5% in February and is now up 5.5% from a year ago down from 5.6% in January.
- The shelter component of CPI led the price gains in February accounting for more than 70 percent of the increase.
