Consumer prices for food and most goods and services were all up in February, but another big drop in energy prices dragged the overall index down.   The Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices fell by 0.2% in February after they had been unchanged in January and fallen 0.1% in December.  The unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually rose to 237.111 in February from 236.916 in January, which left it statistically 1.0% higher than the 234.722 index reading of last February.  Regionally, prices for urban consumers have risen 2.1% in the West, 0.7% in the South, 0.4% in the Midwest, and 0.7% in the Northeast over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people.  With lower energy prices alone responsible for the lower CPI, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 244.528 to 245.680, which is now 2.33% ahead of its year ago reading of 240.083 ...

The seasonally adjusted energy price index fell by 6.0% in February after falling by a 2.8% in both December and January, but the energy index is still just 12.5% lower than it was in February a year ago, because the 9.7% energy index drop of January 2015 is no longer included in the year over year comparison.  Prices for energy commodities were 12.5% lower in February while the index for energy services saw a 0.1% increase, after decreasing by 0.7% in January.  The decrease in the energy commodity index included a 13.0% drop in the price of gasoline, the largest component, while fuel oil prices fell 2.9% and prices for other fuels, including propane, kerosene and firewood, averaged a 0.2% increase.  Within energy services, the index for utility gas service rose by 1.0%, but utility gas was still priced 10.3% lower than a year ago, while the electricity price index fell by 0.2%, after it fell by 0.7% in January.   Energy commodities are now priced 20.9% below their year ago levels, with gasoline 20.7% lower priced than it was a year ago, as it was last January that the gasoline index fell 18.7% in one month, and hence the year over year comparisons going forward from there are from that lower price level.  Meanwhile, the energy services price index is 4.6% lower than last February, as even electricity prices have fallen 3.0% over that period..

The seasonally adjusted food price index rose 0.2% in February, after it had been unchanged in January and fell by 0.2% in December, as prices for food purchased for use at home rose 0.2% while prices for food away from home rose 0.1%, as average prices at fast food outlets rose 0.2% while average prices at full service restaurants rose 0.1%.  0.8% higher prices for fruits and vegetables led the price increase in foods at home, as fresh fruit prices rose 2.3% and dried beans, peas, and lentils prices rose 1.7%, while fresh vegetable prices pulled back 0.4% on a 6.1% drop in the price of tomatoes, and prices for both canned and frozen fruits and vegetables were also lower.  In other categories of food at home, the price index for cereals and bakery products rose 0.2% as breakfast cereal prices rose 1.5% and bread other than white bread prices rose 0.6%, more than offsetting a 1.2% decrease in prices for fresh biscuits, rolls, and muffins.  At the same time, the price index for the meats, poultry, fish, and eggs group fell by 0.1% after falling 1.3% in January and 1.1% in December as prices changes within the group were broadly mixed, with fresh whole chickens up 2.2% while fresh chicken parts were down 1.3%, and with beef roasts up 2.3% while ground beef was priced 0.7% lower.  Likewise mixed were prices for dairy products, as the index was unchanged as fresh whole milk prices fell 0.9% while other milk prices rose 0.7%.  Meanwhile, the index for beverages and beverage materials was 0.6% higher as prices for frozen juices and drinks rose 2.5% and instant and freeze dried coffee prices rose 1.0% while roast coffee prices fell 0.2%.  Lastly, prices in the other foods at home category averaged 0.1% lower as prices for sauces and gravies were down 2.0% while prices for frozen and freeze dried preparations were marked up 1.3% and salad dressings were 1.1% higher.  Only two food line items have seen price changes greater than 10% over the past year; ham prices, which were down 0.7% in February, are now 10.7% lower than they were in February a year ago, while tomatoes are 10.8% higher than last year, despite the 6.1% drop this month. The itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

Among the seasonally adjusted core components of the CPI, which rose by 0.3% in both February and January, the composite of all commodities less food and energy commodities also rose by 0.3%, as did the composite for all services less energy services.  Among the commodity components, which will be used by the Bureau of Economic Analysis to adjust February retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.2% on a 2.1% decrease in prices for major appliances, a 1.2% decrease in prices for bedroom furniture and a 2.4% decrease in prices for other furniture, which were were partially offset by a 1.0% increase in prices for other appliances..  Apparel prices were up 1.6% on a 4.0% increase in prices for men's shirts and sweaters, a 3.5% increase in prices for men's footwear, a 2.7% increase in prices for women's outerwear, an 8.5% increase in prices for watches, and a 3.2% increase in prices for jewelry, which were only partially offset by 2.6% lower prices for boys apparel and a 1.9% decrease in prices for men's suits, sport coats, and outerwear.   At the same time, prices for transportation commodities other than fuel were up 0.2%, as prices for both new cars and trucks and used cars and trucks were up 0.2% while prices for tires fell 0.1%.  In addition, prices for medical care commodities were up 0.6% on 1.1% higher drug prices, while the recreational commodities index was 0.5% lower as prices for toys fell 1.8%, prices for photographic equipment fell 1.2% and prices for TVs were 1.4% lower.  Likewise, the education and communication commodities index was 0.7% lower on a 1.3% decrease in prices for personal computers and an 0.8% decrease in prices for college textbooks, while lastly the separate index for alcoholic beverages rose 0.2%, and the index for other goods rose 0.3%...

Within services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.3% increase in owner's equivalent rent and a 0.9% increase in costs for lodging away from home, while costs for household operations rose 0.5% on a 3.1% increase in moving, storage, and freight expenses.  Medical care services rose 0.5% on a 1.3% increase in health insurance, a 0.9% increase in inpatient hospital services, and an 0.8% increase in dental services, while transportation services index rose 0.2% on a 3.0% increase in car and truck rentals and a 0.8% increase in intercity train fares which were partially offset by an 0.8% decrease in ship fares.  Meanwhile, the recreation services index rose 0.5% as club dues and fees for participant sports and group exercises rose 0.9% and cable and satellite television and radio services rose 0.8%, while education and communication services were 0.1% lower on a 1.0% decrease in prices for wireless telephone services and 0.8% lower delivery services which were partially offset by 1.5% higher technical and business school tuition and fees.  Lastly, other personal services were up 0.1% on a 0.6% increase in checking account and other bank services.   Among core prices, a 12.3% increase in moving and storage expenses was the only line item with a year over year increase greater than 10%, while only telephones, which were priced 16.2% lower, and televisions, which are now 15.0% cheaper, saw their prices drop by more than 10% over the past year...

With this release, we can now attempt to estimate the economic impact of the retail sales report we covered earlier.  For the most accurate estimate, and the way the BEA will be figuring 1st quarter GDP at the end of April, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales.  For instance, February's clothing store sales, which rose by 0.9% in dollars, should be adjusted with the price index for apparel, which was up by 1.6%, to show us that real retail sales of clothing were actually down 0.7% in February.   Then, to get a GDP relevant quarterly change, we'd have to compare such adjusted real clothing sales of January and February with real clothing consumption for the months of October, November and December, and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually.   The short cut we usually take to get a ballpark estimate of real sales is to apply the composite price index of all commodities less food and energy commodities, which was up 0.3%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales.   While those sales were up more than 0.1% in January, their price index was up 0.3%, so real retail sales excluding food and energy sales were down by nearly 0.2%.  Then, for the rest of the retail aggregate, we find sales at grocery stores were down 0.3%, while prices for food at home were up 0.2%, suggesting a real decrease of around 0.5% in the quantity of food purchased in February.  Next, sales at bars and restaurants were up 1.0% in dollars, but those dollars bought 0.2% less, so real sales at bars and restaurants were only up 0.8%.  And while gas station sales were down 4.4%, gasoline prices were down 13.0%, suggesting a solid real increase in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don't have the details on that.  Weighing the food and energy components at roughly 30% of total retail sales, we can estimate that real retail sales in February were down almost 0.1% from January…

However, that January data is further complicated by the 0.43% downward revision to January retail sales.   Table 7 of the January income and outlays report (pdf) showed that real personal consumption expenditures of goods, which excludes sales at bars and restaurants from the goods sales reported by the retail sales report, were originally reported to be up 0.7% in January, after falling 0.2% in December, rising 0.8% in November, and falling 0.2% in October.  Including the revised 1.1% decrease in January sales at bars and restaurants and reducing that by the revised 0.4% decrease in other January retail sales would likely revise the aggregate increase in real January PCE to something on the order of 0.1% from December, which will now probably be revised to down 0.1% from November.  That means real January sales would in turn be virtually unchanged from real November sales but 0.8% higher than real October sales.  Averaging +0.1, 0.0, and +0.8, then suggests real January sales were ~0.3% higher than those of the 4th quarter, while February real sales were 0.1% lower than January's.  That means that so far in the 1st quarter, real personal consumption expenditures for goods is running at a rate a bit more than 0.2% greater than those of the 4th quarter, such that their contribution to first quarter GDP growth will be on the order of just 0.04 percentage points..

(Note: the above was excerpted from my weekly synopsis at Marketwatch 666)