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CPI: Modest Rebound in Core

February 13, 2020

Bottom Line: Core consumer price inflation rose a touch more than expected in January as headline inflation pressures eased due to lower energy prices. Among the core components, commodities related to medical care were lower surprisingly lower. Apparel prices accelerated. Owner's Equivalent Rent, a key measure of the price of shelter, was up 0.24% again but has decelerated after some volatility, up to 3.3% annualized over the last three months versus 2.9% and 3.35% over the last six months and 12 months, respectively. Overall, core inflation remains modest but rebounded slightly in the last three months, settling into a range just a touch above 2%.

The CPI ROSE by 0.15% in January, compared with market expectations for an increase of 0.20%.

  • Food prices increased by 0.21% while energy prices fell by 0.7%. Prices for gasoline fell by 1.6% while prices for fuel oil declined by 1.4%, prices for electricity climbed by 0.4%, and prices for natural gas rose by 1.0%.
    Energy prices are now 6.3% ABOVE their year ago level.
  • Overall consumer prices are now 2.5% ABOVE their year ago level; in January 2019, consumer prices were 1.5% ABOVE their year ago level.
The Core CPI ROSE by 0.24%, compared with market expectations for an increase of 0.20%.
  • Prices for commodities excluding food and energy commodities fell slightly. Gains in apparel (+0.7%), alcoholic beverages (+0.3%), were offset by declines in used cars & trucks (-1.2%), medical care (-0.6%).
  • Prices for services excluding energy services rose 0.3% with a moderate increase in shelter (+0.4%), owner's equivalent rent (+0.3%), and medical care services (+0.3%).
  • Core consumer prices are now 2.3% ABOVE their year ago level; in January 2019, consumer prices were 2.1% ABOVE their year ago level.

Article by Contingent Macro Advisors