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Highlights
In January, CPI inflation picked up at both the headline and core levels. The consumer price index rose 0.2 percent, following no change in each of the prior two months. January's pace, however, was lower than consensus expectations for a 0.3 percent boost. Excluding food and energy, the CPI firmed to a 0.2 percent increase from December's 0.1 percent increase. Analysts called for a 0.2 percent rise.
Turning to major components, energy rose only 0.2 percent, following a 1.3 percent decrease in December. Gasoline rebounded 0.9 percent in January after falling 2.1 percent the month before. But household energy fell 0.6 percent (largely natural gas) for the latest month. Food price inflation held steady at 0.2 percent.
Within the core, upward pressure came from apparel (up 0.9 percent), recreation (up 0.6 percent), tobacco (up 0.5 percent), and medical care (up 0.3 percent). In contrast to these increases, the index for used cars and trucks declined for the fifth month in a row, falling 1.0 percent, and the index for airline fares fell 0.9 percent. The new vehicles index was unchanged in January after declining in each of the prior four months.
Year-on-year, overall CPI inflation came in at 2.9 percent, compared to 3.0 percent in December (seasonally adjusted). The core rate firmed to 2.3 percent from 2.2 percent on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 2.9 percent in January, compared to 3.0 percent in December. The core was up 2.3 percent versus 2.2 percent in December.
The January CPI report overall came in marginally better than expected-but only marginally. The bottom line is that there is no sign of deflation. Today's report gives no ammunition to those hoping for QE3 from the Fed. For Fed officials, the numbers overall fall in between the worries of the inflation hawks and the hoped for numbers of the doves. The January CPI report leaves Fed policy on hold.
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Market Consensus before announcement
This report includes annual revisions to seasonal adjustment factors.
The consumer price index in December was unchanged for the second month in a row with lower energy costs playing a key role. Excluding food and energy, the CPI decelerated to a modest 0.1 percent increase after gaining 0.2 percent in November. By major components, energy dipped 1.3 percent after declining 1.6 percent in November. Gasoline fell 2.0 percent, following a 2.4 percent decline in November. Food price inflation firmed to 0.2 percent after rising 0.1 percent the prior month. Within the core, upward pressure was seen in medical care, recreation, and rent. Declines were seen in used cars & trucks, new vehicles, and apparel.
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