Karee Venema
U.S. consumer price inflation took a surprising turn for the better in February, though the Consumer Price Index (CPI) showed price increases for a broad range of goods and services.
For the record, headline February CPI increased 0.2% month over month, according to the Bureau of Labor Statistics. Economists were looking for inflation to rise 0.3% last month. On an annual basis, headline CPI rose 2.8%, down from 3.0% in January, and below than the 2.9% median forecast.
More importantly, core CPI, which excludes volatile food and energy costs and is considered a better indicator of future prices, increased 0.2%, a deceleration from January's 0.4% jump. Economists were looking for monthly core CPI to increase 0.3%.
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On an annual basis, core CPI also came in lower than expected, at 3.1%% vs the median estimate of 3.2%.
Despite the CPI beat, the bottom line from the February CPI report is that prices are still rising faster than consumers and the Fed would like.
Between 2000 and 2020, annual inflation in the U.S. averaged just 2.1%. (Recall that the Federal Reserve's inflation target is 2%.) Perhaps we didn't appreciate it enough at the time, but the first two decades of the 21st century were a sort of Goldilocks era for inflation: not too fast and not too slow.
Just have a look at some of the subcategories in the latest CPI report to see how much things have changed. Below we highlight the goods and services that are weighing most heavily on folks' finances.
Rising prices: where inflation is hitting hardest
Groceries were mercifully unchanged in February as four categories saw declines. Indeed, the food at home category was flat last month after rising 0.5% in January.
The indexes for fruits, vegetables, nonalcoholic beverages and dairy all declined, though egg prices jumped 10.4% and beef was up 2.4%.
The food away from home category, which includes meals at restaurants and bars, rose 0.4% in February after gaining 0.2% in January.
Meanwhile, used car prices, which had shown price declines in mid-2024, were up 0.9% in February after surging 2.2% in January.
Medicine and medical devices also got a bit pricier last month, as medical care commodities edged up 0.1%. Apparel prices, meanwhile, rose 0.6% after declining 1.6% in January.
Other contributors to inflation were services, especially services excluding energy services, which increased 0.3% last month after rising 0.5% in January. Commodities also chipped in. Excluding food and energy, the index gained 0.2% after increasing 0.3% at the start of the year.
Housing costs, or the shelter index, also remained sticky and lifted inflation last month.
"The shelter index increased 0.3 percent over the month," the BLS said. "The index for owners' equivalent rent rose 0.3 percent in February, as did the index for rent. The lodging away from home index increased 0.2 percent in February."
Elsewhere, prices for motor vehicle insurance index surged 11.1% in February, while the index for recreation rose 1.8%. Medical care and education costs also rose in February.
In better news, the index for airline fares fell 4% last month, while prices for new cars were also down.
Where inflation goes from here is hard to say as forecasters brace for the potential impact of tariffs under the Trump administration.
"Inflation is moving in the right direction," says Bill Adams, chief economist at Comerica Bank. "At the same time, the dizzying back-and-forth over tariffs is a large and unpredictable upside risk to the inflation outlook."
Adams adds that it's likely tariff rates will be higher in the second half of the year and that will "increase the cost of imported consumer goods and input costs for service-providing businesses, likely interrupting inflation's move lower."
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