The CPI report was encouraging. The total CPI rose 0.2% and the year over year increase is only 2.6%. Although real averge hourly earnings fell, real weekly earnings were unchanged.

The core CPI actually fell for the first time since 1982, bring the year over year change in the core CPI to 1.6%. The 6 month SAAR for the core CPI is 0.8%. Despite all the worries about inflation the normal pattern is for the best cyclical reading on the core CPI to occur in the first year or two after a recession. If the economy follows the normal pattern, the core CPI should continue to moderate for another year or two.

The most severe source of higher prices was medical care where medical commodities increased 0.7% and medical services jumped 0.5%. Meanwhile we have our political system voting to ignore the severe problem of soaring health care cost.

Interestingly, one of the largest increases was used car prices that rose 1.5% in January and is now 11.5% above their year ago level. But real used car prices are one of the most reliable leading -concurrent indicators of auto sales. This is logical since the supply of used cars is trade ins for new cars and if new car sales are too low this creates a shortage of used cars.