NAA Inflation Tracker: March 2023

3 minute read

Key Takeaways

  • The headline rate of inflation was at its lowest point since September 2021.
  • Shelter costs were responsible for 70% of this month’s increase in CPI.
  • Consumers expect prices to decline for gas, food, medical care, college tuition and rent in twelve months’ time.

CPI, Latest Release, February 2023   

There were no surprises in this month’s CPI release as all measures of inflation came in largely as expected. The headline rate was up 6.0% year-over-year, seasonally adjusted, while the core rate (excluding food and energy) increased 5.5%. The headline number was at its lowest point since September 2021.

On a monthly basis, items experiencing the largest decreases in prices were piped gas service (-8.0%), fuel oil (-7.9%) and used cars and trucks (-2.8%), while airline fares soared by 6.4%. Tobacco and smoking products, gasoline, and non-alcoholic beverages were all up 1.0% from last month.

cpi as of february 2023


CPI for Housing, February 2023

The CPI includes two measures for shelter costs: owners’ equivalent rent and rent of primary residence, both of which are self-reported. Together, they comprise about one-third of CPI. Prices rose once again, up 8.0% and 8.8% year-over-year, respectively. Shelter costs were responsible for 70% of this month’s increase in CPI and have been rising consistently since May 2021. Given their well-documented lags with private sector data, they can be expected to ease in the coming months.

cpi shelter costs as of february 2023


“Super Core” Inflation, February 2023

Due to these lags in CPI shelter data, the Fed has begun to focus more on “super core” inflation, that is prices excluding food, energy and shelter. At 3.7%, this measure fell to its lowest point in 22 months, a clear signal to the Fed that although there’s more work to be done, monetary policy appears to be on its way to meeting their goals.

cpi less food, shelter, and energy as of february 2023

Inflation Expectations, February 2023

The Fed tracks 21 different measures of inflation expectations. The data presented in the chart below are inflation expectations one year from now from the Federal Reserve Bank of New York’s Survey of Consumer Expectations and the University of Michigan’s Consumer Sentiment Index.

Both measures remain elevated, but are generally moving in the right direction. FRB New York’s one-year inflation expectations rate plunged 0.8 percentage points to 4.2% in February, the lowest rate since May 2021. Consumers expect prices to decline for gas, food, medical care, college tuition and rent in twelve months’ time. The University of Michigan’s rate ticked up to 4.1% but remained well off recent peaks.

inflation expectations one year from now

Wage Growth, February 2023

Wage growth, as measured by average hourly earnings, increased 4.6% year-over-year, well above pre-pandemic levels. On a monthly basis, however, wages rose just 0.2%, the smallest increase in a year. Retail trade posted strong monthly gains (1.1%), as did trade transportation and warehousing (0.6%), information (0.6%), and lessors of residential buildings and dwellings (0.6%), one of the industry categories that includes multifamily owners and operators.

wage growth as of february 2023

What to Watch in the Next Month

  • The Federal Open Market Committee will meet on March 21-22, not only for policy discussions, but it will also update economic projections for GDP, inflation, unemployment rates and the Federal funds rate.
  • The recent bank failures have led to speculation that the Fed will hold interest rates at their current level before increasing them again at the next meeting in May.  While this month’s inflation report could offer them some leeway to take a pause, numerous data releases over the next week - producer price index, retail sales, industrial production, several housing market indicators and the preliminary March consumer sentiment survey, among others – may well lead them to stay on course with a quarter-point rate increase.



Next Tracker: April 12, 2023