Economists predict that the US inflation rate, which rose sharply in January, may have remained high last month, further evidence that progress in curbing price increases has stalled.
The consumer price index is expected to rise by 0.3% in February, after increasing by 0.5% at the beginning of the year. According to a Bloomberg survey of economists, the core index, which excludes the more volatile food and energy categories, is also expected to rise by 0.3%.
Another solid piece of data (possibly due to the rise in prices of goods such as food) will further intensify people’s concerns over persistently high inflation and a slowing economy – the dreaded stagflation. Uncertainty over the impact of President Donald Trump’s trade war on the economy led to a sharp fall in the stock market this week.
Julien Lafargue, chief market strategist at Barclays Private Bank, said: “This seems likely to be a lose-lose situation. Data above expectations could intensify the stagflation narrative, while data below expectations could deepen concerns about a recession.”
Grocery prices have risen sharply in recent months, mainly due to the spread of bird flu in the country, which has pushed egg prices to a record high. At the beginning of this year, the prices of other basic commodities such as meat, fruits and sugar also rose at a strong pace. Some economists expect that this trend will continue in Wednesday’s report.
Morgan Stanley economist Diego Anzoategui wrote last week: “Egg prices continued to rise in February, and food wholesale prices continued to increase at a higher rate,” adding that they expect grocery inflation to remain above pre-pandemic trends at least throughout the summer.
The Fed’s closely watched service-cost gauge, which rose at the fastest pace in a year in January, is expected to ease. The so-called super core services measure, which excludes housing and energy, is expected to decelerate as airfare and medical costs decline.
Anna Wong of Bloomberg Economics said that the February data will reflect the disparity between weak demand for services such as hotels and tourism and the rise in commodity prices.
She wrote in a report: “Although the softening of service prices (reflecting a weakening in consumer demand for non-essential goods) is pushing the economy in the right direction, deflation in the goods sector had already stalled before President Trump imposed tariffs.”
Economists will also closely watch housing costs, which remain one of the most difficult categories to predict in the CPI. Citigroup economists Veronica Clark and Andrew Hollenhorst expect housing prices to rise by 0.27% month-on-month, a slowdown from January.
Many economists have pointed out that businesses often raise prices and fees in the first quarter, which could push up the CPI index, although they are more likely to do so in January than later in the quarter.
Some economists expect that the February report will show for the first time signs of the impact of tariffs, especially the additional tariffs imposed on Chinese imports.
On March 7, Stephen Juneau and Jeseo Park, economists at Bank of America, wrote: “One of the factors that we firmly predict inflation is the 10% tariff imposed on Chinese imports in early February.”
They said, “China accounts for a large share of imports of household goods, clothing and electronic products. If the tariffs do not take effect this month, it only means that the impact will be postponed to the coming months.”
