U.S. Core Inflation Accelerated in February Ahead of Virus

(Bloomberg) -- A key measure of U.S. consumer prices rose in February by the most in five months, highlighting that inflation was strengthening prior to any impact from the coronavirus outbreak.

The core consumer price index, which excludes volatile food and energy costs, rose 2.4% from a year earlier, which also matches the fastest pace since September 2008, and was up 0.2% from the prior month, Labor Department data showed Wednesday. The broader CPI rose 0.1% on the month and 2.3% annually.

The data will be among the last before U.S. economic indicators start to reflect related changes in activity. Prices used to compute the CPI are collected during the entire month.

Core inflation picked up amid gains in shelter and apparel. Prices for medical-care services rose by 5.3% from a year earlier, driven by a record increase in health insurance, a category notable for quirks in the data.

Energy prices fell 2% from the prior month, the most in more than a year, as all of the major component indexes declined, weighing on the overall CPI reading. Gasoline costs slumped 3.4%. Those figures are due for further declines in March after the eruption of an oil-price war between Saudi Arabia and Russia, which also puts downward pressure on inflation around the world.

Food costs climbed 0.4%, the most in a year, while expenses for medical care commodities slipped 0.6% for a second month. Shelter costs, which make up about a third of total CPI, rose 0.3%. Owners-equivalent rent, one of the categories that tracks rental prices, increased 0.2% while rent of primary residence rose 0.3%.

The CPI tends to run faster than the Commerce Department’s personal consumption expenditures price index, which the Federal Reserve officially targets for 2% annual gains. The core PCE index policy makers watch for a better read on underlying trends also has seen subdued gains for the last year.

A separate Labor Department report on Wednesday showed average hourly earnings, adjusted for price changes, rose 0.6% in February from a year earlier after 0.5% in January.

--With assistance from Vince Golle, Joshua Robinson and Sophie Caronello.

To contact the reporter on this story: Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns

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