Oil prices were on the rise before the invasion, so gasoline prices were up. Headline m/m ticked up, core down. We are below peaks for month-on-month, even if you hear about 40 year highs (on year-on-year).
Figure 1: CPI month-on-month inflation rate, annualized (blue), 12 month or year-on-year inflation rate (pink), in decimal form (i.e., 0.05 means 5%). NBER defined peak-to-trough recession dates shaded gray. Source: BLS, NBER, and author’s calculations.
Figure 2: CPI core month-on-month inflation rate, annualized (blue), 12 month or year-on-year inflation rate (pink), in decimal form (i.e., 0.05 means 5%). NBER defined peak-to-trough recession dates shaded gray. Source: BLS, NBER, and author’s calculations.
Month on month inflation rates indicate next month’s headline will remain elevated. For the various measures available (chained, trimmed, sticky price), we have the following picture.
Figure 3: Month-on-month inflation of CPI (blue), chained CPI (brown), 16% trimmed CPI inflation (red), sticky price CPI inflation (green), personal consumption expenditure deflator inflation (black), all in decimal form (i.e., 0.05 means 5%). Chained CPI seasonally adjusted using arithmetic deviations (brown). NBER defined recession dates (peak-to-trough) shaded gray. Source: BLS, BEA, Atlanta Fed, NBER, and author’s calculations.
Sticky price inflation down suggests infrequently adjusted prices are being changed smaller amounts. Trimmed inflation down suggests that outliers are pushing up inflation (of which gasoline would be an obvious candidate). This is confirmed by re-examining headline vs. core vs. gasoline-CPI:
Figure 4: Month-on-month inflation of CPI (black), core CPI (teal), gasoline CPI component (red, right scale), all in decimal form (i.e., 0.05 means 5%). NBER defined recession dates (peak-to-trough) shaded gray. Source: BLS, NBER, and author’s calculations.
Month-on-month, annualized gasoline inflation was 116% in February (6.6%, not annualized). Clearly, if oil prices remain around $110 throughout March, then gasoline prices will rise further.
