But out of the bottle, inflation is like that. That brings a nasty surprise.
good Because this is so important, we start with the “core services” CPI (services minus energy services)., and because Powell keeps talking about it. We have been concerned in recent months that core services inflation will not ease, and find the acceleration last fall “very disconcerting.” But inflation is what it is, and it tends to bring nasty surprises. And now it has happened.
“Core Services” CPI jumped over 0.66% from December to January, or 8.2% increase per year (Blue). Only three months (April, June, and September 2022) have been worse this inflation cycle. This includes things like housing, insurance, healthcare, and subscriptions, but does not include energy services.Core services are where the majority of consumer spending takes place – and then heated again from an already hot level.
The three-month moving average, which eliminates the monthly squiggly lines, rose 0.50%, or 6.2% annualized (red), the worst increase since March 2023. This is all according to CPI data released today by the Bureau of Labor Statistics.
Inflation in January can be summarized as follows:
- Energy prices continued to fall (down 10.4% annually in January compared to December).
- Due to the drop in used car prices, durable goods prices continued to decline (down 5.4% annually in January compared to December).
- However, food prices rose (4.5% annual increase in January compared to December).
- And “core services” performed very well (+8.2% annually).
“Core CPI” The index of underlying inflation, which excludes food and energy products, rose 0.39% in January compared to December, accelerating to an annualized rate of 4.8% (blue line), the highest level since April last year. Although it was pushed down slightly by the decline in the durable goods CPI, it was pushed up even more strongly by the core services CPI.
The three-month moving average of core CPI in January accelerated to an annualized rate of 4.0% from December, the worst since June (red line).
Overall CPI The increase accelerated to 0.31% from the previous month, or an annualized rate of 3.8%, making it the worst figure since September.
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