The CPI ROSE by 0.1% in January, in line with market expectations. Food prices increased by 0.1% while energy prices jumped by 0.6%. Prices for gasoline declined by 1.0% while prices for fuel oil increased by 6.8%, prices for electricity climbed by 1.8%, and prices for natural gas rose by 3.6%. Energy prices are now 2.1% ABOVE their year ago level. Overall consumer prices are now 1.6% ABOVE their year ago level; in January 2013, consumer prices were also 1.6% ABOVE their year ago level. Year-over-year consumer inflation peaked in September 2011 at 3.9%. Much of the slowing since then has been because of lower energy prices despite this month's increase.
The Core CPI ROSE by 0.1%, in line with market expectations. Prices for commodities excluding food and energy commodities rose by 0.1%. Gains in tobacco (+0.7%), medical care (+0.5%) were partially offset by declines in used cars & trucks (-0.5%), apparel (-0.3%), new vehicles (-0.3%), and alcoholic beverages (-0.1%). Prices for services excluding energy services rose 0.2% with modest increases in shelter (+0.3%), medical care services (+0.2%), and owner's equivalent rent (+0.2%). Core consumer prices are now 1.6% ABOVE their year ago level; in January 2013, consumer prices were 1.9% ABOVE their year ago level. Year-over-year core consumer inflation bottomed at 0.6% in October 2010, then rose through May 2012 to a peak of 2.3%. Since then, the year-over-year rate has topped out and begun a steady retreat.
Bottom Line: Headline consumer inflation increased in January as both energy prices and food prices increased modestly. Consumer prices are now 1.6% above their year ago level but have been slowly retreating since September 2011 (when they were 3.9%). Meanwhile, core consumer prices rose modestly and are 1.6% above their year ago level, a pace that has been slowly retreating over the past 12 months from May 2012 peak of 2.3%. Inflationary pressures at the consumer level remain quite modest. Owner’s Equivalent Rent (OER) rose by 0.2% compared to the 3-month average of 0.24%. The OER rose by 2.52% yoy and has moved 44 bps since March (a major component of CPI that is an estimate of the cost of shelter).