The annual inflation rate dipped in January to a level not seen in 15 months, despite jumping significantly from December, the Labor Department reported Tuesday.
The U.S Bureau of Labor Statistics issued its monthly report on consumer prices, with the Consumer Price Index rising 0.5% in January on a seasonally adjusted basis. That was up from a 0.1% increase in December, but it met analysts’ expectations.
Over the past 12 months, the all-items index increased 6.4% before seasonal adjustment, down slightly from a 6.5% annual increase reported in December and the smallest 12-month increase since the period ending October 2021. Analysts had expected a larger decline, estimating a 6.2% annual rate ahead of the report.
The shelter index was by far the largest contributor to the monthly all-items increase, accounting for nearly half, the BLS said, with the indexes for food, gasoline, and natural gas also contributing. The shelter index increased 0.7% from December, while the food index increased 0.5% over the month, with the food at home index rising 0.4%. The energy index increased 2% over the month, as all major energy component indexes rose.
The index for all items less food and energy — considered the core inflation rate — rose 0.4% in January from a month earlier. Categories that increased in January included shelter, motor vehicle insurance, recreation, apparel, and household furnishings and operations. The indexes for used cars and trucks, medical care, and airline fares were among those that decreased.
Over the past 12 months, the all items less food and energy index rose 5.6%, its smallest 12-month increase since December 2021. The food index increased 10.1% for the 12 months ended in January, while the energy index increased 8.7% over the same period.
In comments posted to Twitter, Charlie Bilello, chief market strategist for wealth management firm Creative Planning, said the shelter index increase to an annual rate of 7.9% is “the highest rate of housing inflation since 1982.”
“Why is shelter CPI still moving higher while actual rents are moving lower?” he asked in a Twitter thread. “Shelter CPI is a lagging indicator that had significantly understated actual housing inflation over the last two years.”
He continued, “Shelter CPI is now playing catch up but still only shows a 14.9% increase since the start of 2020 versus a 20.3% increase in actual rents and a 40% increase in home prices (nationally). Which means that we could still see more increases in shelter CPI to close some of that gap.”
The mixed CPI report follows January’s jobs report, which defied expectations by adding 517,000 on a seasonally adjusted basis, blowing past analysts’ expectations that the pace of hiring would slow to 190,000 jobs.
With the CPI and jobs reports still showing signs of strength in the economy, they appear to support Federal Reserve Chairman Jerome Powell’s recent statement that fight against inflation isn’t over, so analysts should not expect rate cuts in the near future.
