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CPI: Cooling Only Very Slowly

February 14, 2023
Bottom Line: Consumer prices rose in January, mostly as expected, as gasoline rose, pushing the headline back to showing gains after December's declines. As expected, core prices rose 0.4%, led by Owner's Equivalent Rent (OER), the largest component of core, which was up 0.7%, slightly slower than the 0.8% reading in December. Medical care services were also lower, dropping 0.7% after a rebound in December. And the used vehicle component, which tends to lag the major used car price index by about a month, was still lower, despite reports of higher used car prices in January (thus, we should expect a rebound in this component next month). Finally, apparel prices were notably higher in January.
Last week the BLS released significant revisions to previously reported data. The net impact was small for the year, but the 2nd half was revised up, suggesting the trend, which was decelerating less than we had previously thought.
Services excluding rents, an indicator that Fed Chair Powell has mentioned in the last several press conferences, rose over 0.5% and was still annualizing over 5% in the three months that ended in January, just below the average pace of the prior six months(6%). Overall, considering this January data and revisions to previously reported data, the trend in core CPI is decelerating only very slowly.
ROSE by 0.52% in January, compared with market expectations for an increase of 0.50%.
Food prices increased by 0.51% while energy prices rose by 2.0%.  
  • Prices for gasoline rose by 2.4% while prices for fuel oil declined by 3.9%, prices for electricity climbed by 0.5%, and prices for natural gas rose by 6.7%.  
  • Energy prices are now 8.4% ABOVE their year-ago level.
Overall consumer prices are now 6.3% ABOVE their year-ago level; in January 2022, consumer prices were 7.6% ABOVE their year-ago level.
The Core CPI ROSE by 0.41%, compared with market expectations for an increase of 0.40%.  Prices for commodities excluding food and energy commodities rose by 0.1%.
  • Gains in medical care (+1.1%), and apparel (+0.8%) were offset by declines in used cars & trucks (-1.9%). Prices for services excluding energy services rose 0.5%, with an increase in transportation (+0.9%), shelter (+0.7%), and owner's equivalent rent (+0.7%).
Core consumer prices are now 5.5% ABOVE their year-ago level; in January 2022, consumer prices were 6.1% ABOVE their year-ago level.
Article by Contingent Macro