Oil prices rose before the invasion, so gasoline prices rose. Heading m/m goes up, core goes down. Even if you hear about a 40-year high (year-over-year), we’re still below the peak on a sequential basis.
figure 1: CPI month-on-month inflation, annualized (blue), 12-month or year-over-year inflation (pink), in decimal form (ie 0.05 for 5%). The NBER uses shades of grey to define the peak and trough dates of the recession. Source: BLS, NBER, and author’s calculations.
figure 2: CPI core month-on-month inflation, annualized (blue), 12-month or year-over-year inflation (pink), in decimal form (ie 0.05 for 5%). The NBER uses shades of grey to define the peak and trough dates of the recession. Source: BLS, NBER, and author’s calculations.
The month-on-month inflation rate suggests that the headlines will remain elevated next month. For the various measures available (chained, trimmed, sticky price) we have the images below.
image 3: CPI month-on-month inflation (blue), chained CPI (brown), 16% adjusted CPI inflation (red), sticky price CPI inflation (green), PCE deflator (black), all in decimal form (i.e. , 0.05 means 5%). Chained CPI (brown) seasonally adjusted using arithmetic bias. NBER-defined recession dates (peaks and valleys) shades of gray. Source: BLS, BEA, Atlanta Fed, NBER, and author’s calculations.
The decline in sticky price inflation suggests that infrequently adjusted prices are adjusting slightly. Falling inflation suggests that outliers are pushing inflation higher (of which gasoline would be an obvious candidate). This is confirmed by rechecking the headline, core and petrol-CPI:
Figure 4: The month-on-month inflation for the CPI (black), core CPI (turquoise), gasoline CPI component (red, scale on the right) is in decimal form (ie 0.05 for 5%). NBER-defined recession dates (peaks and valleys) shades of gray. Source: BLS, NBER, and author’s calculations.
The month-on-month annualized gasoline inflation rate in February was 116% (6.6%, not annualized). Obviously, if oil prices remain around $110 throughout March, gasoline prices will rise further.
