Consumer Inflation Rising Faster than Expected

Headline CPI inflation rose +.4% MoM (consensus +.3%) and +4.3% YoY (consensus +4.2%), while core, which excludes food and energy price hikes, rose +.3% MoM (consensus +.2%) and+2.5% YoY (consensus +2.4%).  The broad based increase in inflation will be a concern for the Fed. 

 

The annual increase in core CPI is the highest since last March, and has risen steadily over the past four months from 2.1% to the current +2.5% YoY.

 

The +4% annual increase in headline CPI has only occurred 9 times (months) in the past 17 years, and three of those occurrences have been over the past three months.  Prior to this increase, the last time headline inflation rose over 4% YoY was in the summer of 2006.

 

Energy and food prices both rose a strong +.7% MoM in January.  Energy prices have risen +20% YoY while food prices are up +5% YoY.  Food accounts for about 20% of the US CPI index.  Owner's equivalent rent held steady at +.3% MoM growth for the third month in a row.  Tenant rents also rose +.3% MoM in January.  Over the past year, housing costs have risen +3% YoY.  Rental costs represent approx. 40 percent of the core CPI index.. 

 

Personal computers broke their deflationary streak in January, rising +1% MoM, but are still down a substantial -12% YoY.  Gasoline rose +1.2% MoM and is up +35% YoY.  Almost all categories saw rising prices.  Apparel rose +.4% MoM (-.2% YoY), transportation rose +.5% MoM (+9% YoY), medical care increased +.5% MoM (+5%YoY), and education +.4% MoM (+3% YoY).  Commodity and service prices saw the largest gains in a long time.  Lodging away from home rose a strong +1.1% MoM.

 

The only outright pricing decline was in vehicles, which fell -.1% MoM, and are unchanged year-over-year. 

 

The CPI is the government's broadest indicator of prices paid by consumers for goods and services, and uses costs averaged over the entire month.  Higher inflation rates are part of the reason that longer-term interest rates have been rising again recently, and are also keeping the dollar under pressure to devalue.  Today's data indicates that higher import prices, which are at record levels, are impacting the broader economy.  Producer prices will not be released until next week.