Estimated read time: 3-4 minutes
- US inflation fell to 2.8% in February, below economists' expectations.
- New tariffs may reverse this trend, potentially increasing consumer prices in key areas.
- Mountain West states, including Utah, recorded the lowest regional inflation at 1.8%.
SALT LAKE CITY — U.S. inflation saw an incremental decrease in February, inching down to a 2.8% annual rate, below January's 3% level and a reading lower than most economists were expecting for the second month of the year.
But it could be the last downtick for some time as the data was assembled ahead of new trade tariffs and the likelihood that the levies on imported goods and materials will lead to higher consumer prices in some areas.
The February Consumer Price Index report from the U.S. Labor Department released Wednesday found overall prices on goods and services moved up 0.2% on a monthly basis as did core inflation, which strips out volatile food and energy costs. Annual core inflation for February came in at 3.1%, down from January's 3.3% rate. Last month, core inflation hit its lowest 12-month reading since 2021.
Mountain West states, which include Utah, were tied for the lowest regional inflation in the country in February at 1.8%, according to the new report. Annual inflation for the group of states was up from January's 1.4% reading.
Nearly half of the overall price increases in February were driven by a 0.3% monthly increase in costs related to shelter, according to the report. What consumers pay for shelter rose at a 4.2% annual rate in February, the lowest reading since December 2021.
Overall food prices grew at a 2.6% annual rate in February with groceries up 1.9% and food away from home costing 3.7% more than this time last year. Egg prices continue to be an outlier with prices up 10.4% on a monthly basis in February and were 58.8% more than a year ago.
Tariffs impact on consumer prices
While CPI inflation has marched down, albeit erratically, from a 40-year high of 9.1% in June 2022, that trend is set for a reversal as the impacts of new trade tariffs on consumer prices are poised to make themselves felt.
"Good news on the inflation fronts in February, but a cloud cover is on the horizon," Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics, wrote Wednesday, per a report from CNN. "Looking ahead, the inflation landscape has become increasingly uncertain as various economic factors begin to take effect. One of the key contributors is the impact of tariffs, which have started to influence consumer prices."
President Donald Trump has announced, then paused, a number of new tariff policies in the past few weeks with only the new 10% increase on Chinese goods taking effect in February. On Wednesday, Trump's sector-specific levy of 25% on all imported steel and aluminum began and Sohn noted that the new surcharge will likely show up in higher costs for vehicles in the U.S. this month. Sohn also expects further increases in U.S. grocery prices.
"Consumers should prepare for significant increases in the cost of essential groceries, including eggs, baked goods and other groceries," Sohn said. "Supply constraints, coupled with additional costs from tariffs, will push food prices higher and are expected to continue doing so in the coming months."
