Keeping you up to date on the latest data releases.
The headline CPI was flat in January, as falling energy prices offset increases elsewhere in the retail marketbasket. On a year-over-year basis, the CPI is now up 1.6 percent, softening from a growth rate of 2.2 percent back in October as energy prices have headed declined in recent months. Food prices were also a little soft in January, rising just 0.5 percent compared to its previous three-month annualized growth rate of 2.4 percent. However, that’s where the softness ends. Price increases were much more prevalent elsewhere in the index. Excluding food and energy prices, the “core” CPI jumped up 3.1 percent in January, breaking from its near-to-longer term trend. This was the first increase in the core CPI above 3.0 percent since August of 2011 and nearly double its prior three-month annualized growth rate of 1.6 percent. Despite January’s increase, the 12-month growth rate in the core CPI remained at 1.9 percent.
Our measures of underlying inflation were also elevated relatively to their recent trends, but to a lesser degree. The median CPI rose 2.6 percent in January, compared to its near-term (three-month) growth rate of 2.2 percent and its year-over-year growth rate of 2.1 percent. The 16 percent trimmed-mean CPI increased 2.2 percent during the month, modestly above its year-over-year growth rate of 1.8 percent.
As for the reason for January’s uptick in underlying inflation, the Bureau of Labor Statistics (BLS) pointed to increases in shelter (up 2.6 percent) and apparel prices (up 9.9 percent) as the impetus. However, there’s a little more to this story. The modestly above-trend rise in rents is nothing new, but an examination of the price change distribution reveals an upward shift away from the lower tail. In January, roughly one third of the overall index exhibited a price change of less than 2 percent, compared to roughly half of the index over the past three months. Some of that weight shifted toward the center of the distribution (rising at rates between 2 percent and 3 percent), but there was also a distinct increase in the amount of the index rising at rates in excess of 5 percent (15 percent in January, compared to an average of 9 percent over the past 3 months).