Inflation held steady in February, but Iran war could raise consumer prices

The Consumer Price Index (CPI) rose 0.3% in February and 2.4% year over year, the Bureau of Labor Statistics reported this week.

Prices inched up from a 0.2% increase in January, but held steady year over year, which aligns with last month’s annual increase and analysts’ estimates. February’s CPI does not include the impact of the US and Israel’s war with Iran, which began on the final day of the month.

Food prices climbed above overall inflation, with a 0.4% month over month and 3.1% YoY bump. Price increases hit half of the six major grocery indexes—other food at home (+0.8%), fruits and vegetables (+1.4%), and nonalcoholic beverages (+0.8%). A 3.7% month over month jump in candy and chewing gum drove the rise in other food at home prices, while continually elevated lettuce prices helped increase the fruit and vegetable index. Dairy and related products, and cereals and bakery products both declined, while prices of meats, poultry, fish, and eggs, were flat.

Across other retail categories, the index for apparel rose 1.3%, with jewelry up 7%, thanks to higher gold and silver prices. Personal care products ticked up 0.1%.

The war could push consumer prices up. It has already notably impacted gas prices by about 20%, per the Associated Press. Higher oil prices taken on by shipping companies will likely be passed along the supply chain, eventually increasing consumer goods prices, including groceries, experts say.

High prices are contributing to consumer pullback and trade-down in spending, hitting retailers’ and brands’ volumes. Several have turned to lower prices, like PepsiCo’s price cut on popular snacks like Doritos last month. This week, Target announced it was cutting prices on 3,000 items from 5% to 20% on categories like apparel, home, and essentials to emphasize its new focus on serving “busy families,” Chief Merchandising Officer Cara Sylvester said.

And while refunds resulting from the Supreme Court’s ruling striking down President Trump’s tariffs are still TBD, Costco CEO Ron Vachris said last week the club store would slash prices if it did receive a refund.