EURGBP TECHS: Impulsive Bull Wave Extends

On the headline side of CPI, the pullback to 0.22% M/M from 0.47% in Jan came with lower than expected food price inflation (0.2% M/M vs 0.3% expected, 0.4% prior) offset by slightly less of a pullback in energy prices than expected (0.2% vs 0.0% expected, 1.1% prior).

• Within food, it was "food at home" (ie groceries) that was the main decelerator, rising 0.0% after 0.5% prior, with dairy and fruit/vegetables in sequential deflation (-1.0% and -0.5% respectively), and meats/poultry/fish/eggs decelerating to a still-high 1.6% (1.9% prior). Food away from home ticked up however to 0.4% after 0.2% prior.
• The closely-watched eggs category saw a 10.5% increase, a slight deceleration from 15.2% in January ( though it's now up 58.8% Y/Y).
• Within energy, motor fuel's 0.9% decline matched expectations, but a strong pickup in energy services (1.4% after 0.3%) led by acceleration in both electricity and gas led to the above-expected aggregate figure. 

• MNI calculations suggest that 34% of the overall CPI basket increased at 3% Y/Y or higher in February, compared to 30% in January for the highest share since May 2024.
• It pushes it away from the 24% averaged in 2019 and 19% through 2015-19, with that historical wedge still firmly driven by services.
• Details suggest February’s uptick is a reasonably broad move. The same share specifically for core goods increased from 13% to 19% (highest since Apr 2024), whilst core services increased from 55% to 63% (highest since Nov 2024).
• These are volatile metrics, especially for core services recently, but they’re reasonable increases ahead of tariff implementation. Closer to 35% of the core services basket was running at or faster than 3% Y/Y in the years leading up to the pandemic.
• See the below charts for clearer context: 

The outsized downside contribution to the "miss" in core PCE was largely due to airfares - that alone shaved 0.05pp from core CPI (eg if it had been slightly positive as expected rather than -4.0%, core CPI would have come in roughly in line with expectations).

• We noted the pullback in shelter prices elsewhere, but housing and lodging combined resulted in "only" a -0.04pp swing in core CPI in Feb vs Jan, whereas car insurance and airfares contributed -0.12pp to the swing.
• In the table below, the swing higher in "other goods" was largely accounted for by apparel (2.5% of the CPI basket) flipping from -1.4% M/M in January to +0.6%; vehicle prices were relatively in line in terms of deceleration from January's outsized gains.
• One services category that didn't slow much from January was communications (3.1% of the CPI basket), rising 0.3% after 0.4%; we also note that medical care services (6.7% of CPI) accelerated to 0.3% M/M after 0.0% in January, led by professional services (+0.3% after -0.2%).