The Bureau of Labor and Statistics reported today that the Consumer Price Index dropped 0.3%, the first time in 13 months to be exact (February 2016). The CPI is an indicator that measures the weighted average of a basket of goods and services.
This comes after a small increase of 0.1% in February. One might suggest as cost of food, energy and services decreases, it could help lower income individuals buy more products and save more. However, it also suggests that our economy is not as strong as it seems. It gives the impression that demand is weak and thus make businesses suffer.
Some of the major factors in the decline was wireless telephone services and gasoline. Gasoline dropped 6.2%, used cars and trucks down 0.9% and energy dropped 3.2%.
Food index, on the other hand, increased 0.3%. This comes from food at home increasing 0.5% which is the largest increase since May 2014 and food away from home increasing 0.2%.
I believe we should not worry after just month of decline in the CPI. This could come after weather making it difficult for customers to go out and buy goods and services. This can be reflected in today’s report of the advance retail sales report. Businesses are looking to bring the customers in but if the CPI shows another weak report next month, it could show evidence of a weaker economy than many might believe.