March 2015 Consumer Price Index

Inflation remained tame for consumers in March 2015 according to the Consumer Price Index (CPI) most recently released by the Bureau of Labor Statistics.  Prices rose 0.2 percent, matching February’s uptick on a percentage point basis.  However, on a year-over-year basis, the index declined 0.1 percent before seasonal adjustments.

Declines in the food index were more than offset by price gains in energy and shelter.  Overall food fell 0.2 percent, but the food at home index dropped the most since April 2009, falling 0.5 percent in the period; good news for us vegetarians, the fruits and vegetables index fell 1.4 percent, its third monthly decline in a row.  However, energy was 1.1 percent higher than a month earlier, led by the gasoline and fuel oil indices.  Shelter rose 0.3 percent; rent and owner’s equivalent rent each rose 0.3 percent, and lodging away from home increased 0.4 percent.

After stripping out food and energy, core prices rose 0.2 percent in March.  Year-over-year core inflation increased by 1.8 percent, rising for the third consecutive month and inching closer to a level that is in line with the Federal Reserve’s desired level at or slightly above two percent.  Shelter and medical care have led the core measure higher in the last twelve months as their indices have increased 3.0 percent and 2.5 percent respectively.

The CPI appears to be starting to rise.  Services like shelter and medical car are leading this indicator higher.  Some of our central bankers may become alarmed about inflation edging closer to their explicit 2.0 percent target; however, Atlas is not too concerned yet because other data suggest the economy has been softening, and our dollar is still relatively strong versus other currencies.  Both of these factors should help keep the price of goods from increasing too quickly.  Atlas still expects the central bank to remain cautious while adjusting rates, but services are a large part of the economy, so we will be keeping a particularly close watch on their price movements in the months ahead.    (by C. Cox)