Consumer prices increased in January, according to the Bureau of Labor Statistics. NAM Chief Economist Chad Moutray laid it out for us.
A steady rise: “Consumer prices rose 0.6% in January, matching the pace in December and continuing to increase solidly,” said Moutray.
The details: “Food and energy prices both soared 0.9% in January, but with gasoline costs down 0.8%,” said Moutray. “Excluding food and energy, core consumer prices increased 0.6% in January, also matching the rate in December. The cost of used cars and trucks increased 1.5% in January, but prices for new vehicles were flat. With the sector grappling with supply chain disruptions and the chip shortage, new vehicles and used cars and trucks have seen price growth of 12.2% and 40.5% year-over-year, respectively. Consumers also paid more for apparel, household furnishings and supplies, medical care services, shelter and transportation services.”
The long game: “The consumer price index has risen 7.5% over the past 12 months, up from 7.1% in December and the fastest year-over-year pace since February 1982,” said Moutray. “At the same time, core inflation (which excludes food and energy) increased 6.0% year-over-year in January, up from 5.5% in the prior release and the biggest increase since August 1982.”
The big picture: “Overall, price pressures for consumers remain very elevated,” said Moutray. “Automobiles exerted an outsized impact in this report, as noted above. The data are expected to stabilize over the course of this year, especially once bottlenecks start to abate. A more favorable base comparison in 2022 will also help. Yet, consumer prices are predicted to continue growing by more than consumers have become accustomed to in recent years, with core consumer inflation rising around 3.5% year-over-year by the end of 2022.”
The policy angle: “For its part, these data will put continued pressure on the Federal Reserve to tackle inflation,” said Moutray. “The Federal Open Market Committee has already said that it will end all asset purchases by early March, and it will likely start reducing its balance sheet over the summer. In addition, the FOMC will almost certainly increase short-term rates at its March 15–16 meeting, perhaps by 50 basis points (but at least by 25 basis points).”