CPI: Headline Acceleration, Key Core Component Slowing

Bottom Line: Headline consumer inflation rose more than expected in January, while net of revisions core CPI was mostly in-line with expectations. Core CPI rose at 2.9% annualized over the last three months, and 2.6% over the last six months -- relative to last month's readings this shows a modest acceleration in the pace of gains (last month these figures were 2.5% and 2.2%, respectively). That said the year-on-year core figure stands at 1.8%, the same as last month. Transportation and apparel drove gains at the core level. The largest core component, shelter, decelerated again and is showing signs of further deceleration. The CPI ROSE by 0.5% in January, compared with market expectations for an increase of 0.3%.

• Food prices increased by 0.20% while energy prices rose by 3.0%.
• Prices for gasoline rose by 5.7% while prices for fuel oil increased by 7.0%, prices for electricity slipped by 0.2%, and prices for natural gas fell by 2.6%. Energy prices are now 5.9% ABOVE their year ago level.

Overall consumer prices are now 2.1% ABOVE their year ago level; in January 2017, consumer prices were 2.5% ABOVE their year ago level. The Core CPI ROSE by 0.3%, compared with market expectations for an increase of 0.2%.

• Prices for commodities excluding food and energy commodities rose by 0.4%.
• Gains in apparel (+1.7%), used cars & trucks (+0.4%), were offset by declines in medical care (-0.1%), new vehicles (-0.1%).
• Prices for services excluding energy services rose 0.3% with moderate increase in transportation (+0.8%), medical care services (+0.6%), and owner's equivalent rent (+0.3%).

Core consumer prices are now 1.8% ABOVE their year ago level; in January 2017, consumer prices were 2.3% ABOVE their year ago level.