Inflation Surging Higher in January US CPI +7.5% y/y largest Increase since Feb 1982

US CPI in January rose 0.6% m/m (consensus +0.4%). Core CPI rose 0.6% (consensus +0.5%). On a year-over-year basis, total CPI is up 7.5% (versus 7.0% in December) and core CPI is up 5.5% (versus 4.9% November). Inflation remains persistently high as Central Bankers keep trying to reassure us that soaring inflation will come under control. Pressure is on the Fed to begin moving aggressively when officials meet next month.

Inflation

January marked the seventh time in the past 10 months that the core CPI rose at least 0.5% over the month before. 

Increases in the cost of food, electricity and shelter were the largest contributors to the monthly rise, the Labor Department said, with both the food and energy indexes rising 0.9% over the month. Groceries were a significant driver, with the food at home index rising 1.0% over the month after a 0.4% rise the month before, driving prices up 7.4% over the year. 

Gasoline prices, meanwhile, decreased 0.8% in January, though they were offset by a 9.5% monthly rise in fuel oil and a 4.2% monthly increase in electricity. The cost of gasoline is up 40% over the year.

US January 2022 Highlights

US January CPI +7.5% vs +7.3% expected

  • Highest since Feb 1982
  • Prior was 7.0%
  • m/m CPI +0.6% vs +0.5% expected
  • Prior m/m reading was +0.6%
  • Real weekly earnings -0.5% vs +0.1% prior (revised to -0.3%)

Core inflation:

  • Ex food and energy +6.0% vs +5.4% y/y expected
  • Most since August of 1982.
  • Prior ex food and energy +5.5%
  • Core m/m +0.6% vs +0.5% exp
  • Prior core m/m +0.6%
  • Energy biggest contributor again (27% vs 29.3% in December), with gasoline prices surging 40% (49.6% in December).
  • Inflation accelerated for shelter (4.4% vs 4.1%); Housing +0.7%, Owners’ equivalent rent +0.4%, Lodging away from home -3.9%
  • Food (7% vs 6.3%), namely food at home (7.4% vs 6.5%);
  • New vehicles (12.2% vs 11.8%);
  • Used cars and trucks (40.5% vs 37.3%)
  • Medical care services (2.7% vs 2.5%).
US CPI Inflation – where it is

Market Reaction:

US 2-year yields are up 8 basis points to 1.4300%.

Market is now pricing a 43% chance of a 50-basis point hike in March, up from 30% before the data. Six hikes are priced in for 2022 now.

Price gains were broad-based, however, with “virtually all component indexes showing increases over the past 12 months,” the Labor Department said. Core rates, which strip out volatile food and energy prices, rose 0.6% in January from the month prior for a 6.0% year-over-year pace—higher than consensus expectations for 0.4% and 5.9% readings, respectively.

Shelter costs, which make up about 40% of core CPI, contributed to the headline increase, up 0.3% in January and reaching a 4.4% annual pace. A 0.5% increase in rent over the month was offset by a 3.9% decrease in lodging away from home, a category that includes hotels, where prices dropped in January due to the effects of the Omicron variant.

US CPI January 2022

CPI in January was up 0.6% month-over-month (consensus +0.4%) following a 0.9% increase in October

United States Consumer Price Index (CPI)

 

CPI in January year-over-year accelerated to 7.5%, the highest since February of 1982 and well above market forecasts of 7.3%,

United States Inflation Rate

Core Inflation y/y

United States Core Inflation Rate

Food

United States Food Inflation

Housing

United States CPI Housing

Transportation

United States CPI Transportation

US Core CPI November 2021

United States Core Consumer Prices

 

The effects of the coronavirus pandemic are weighing on prices since in last year many businesses closed and lockdowns were imposed, denting economic activity.  A jump in commodities and material costs, coupled with supply constraints, are pushing producer prices up and some companies are passing those costs to clients

US Real Earnings November 2021

  • Real weekly earnings -0.2% vs -0.9% prior

 

“I’m making more money…But I don’t see it because I’m paying more money for stuff now.” Low-wage workers are getting sharp raises. Inflation is eating them up. via Greg Ip WSJ

 Source: BLS

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