CPI A Bit Better than Expected Mostly Due To Falling Gasoline

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CPI Month-Over-Month Percent Change

The BLS Consumer Price Index rose 0.2 percent in January vs the expected 0.3 percent.

The better than expected numbers are largely due to a 3.19 percent plunge in the price of gasoline.

The BLS rounds to 1 decimal point. I show 2 decimal places.

CPI Month-Over-Month

All Items: 0.17 percent
All Items Excluding Food and Energy: 0.30 percent
Food and Beverage: 0.18 percent
Shelter: 0.22 percent
Medical Care: 0.26 percent
Energy: -1.47 percent
Gasoline: -3.19 percent

The CPI rose 0.17 percent. Core CPI (excluding food and energy) rose 3.0 percent.

Most of the difference is the steep decline in gasoline. And that won’t last.

CPI Month-Over-Month Energy, Gasoline, Utilities

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CPI Month-Over-Month Percent Change Energy, Gasoline, Utilities and Fuel

Looking ahead, we are not going to see a repeat performance of energy, gasoline, and utilities.

CPI Month-Over-Month Rent and OER

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CPI Month-Over-Month Percent Change Rent and OER

Shelter Components Month-Over-Month

Rent of Primary Residence: 0.25 percent
Owners’ Equivalent Rent: 0.22 percent

The trend in shelter is lower but at a diminishing rate. The price of new leases is falling in many areas, but existing leases are still rising.

Owner’s Equivalent Rent is 26.204 percent of the CPI. Rent of primary residence is 7.840 percent of the CPI.

Looking ahead, these are the primary disinflationary pressures.

CPI Month-Over-Month Medical Care

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CPI Month-Over-Month Percent Change Medical Care

Medical Care Components Month-Over-Month

Medical Care: 0.26 percent
Medical Care Services: 0.33 percent
Medical Care Commodities: -0.6 percent

Medical Care Services is 6.935 percent of the CPI. Medical Care Commodities is 1.489 percent of the CPI.

Medical Care Services is over 82 percent of the Medical Care index.

CPI Month-Over-Month Food

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CPI Month-Over-Month Percent Change Food

Month-over-month food at home rose 0.19 percent, away from home 0.15 percent.

It’s hard to see much of a trend in food prices month-over-month. However, the year-over-year charts, shown below, shows upward pressure on food prices.

CPI Year-Over-Year Percent Change

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CPI Year-Over-Year Percent Change

CPI Year-Over-Year Percent Change Details

All Items: 2.4 percent
All Items Excluding Food and Energy: 2.5 percent
Food and Beverage: 2.8 percent
Shelter: 3.0 percent
Medical Care Services: 3.9 percent
Utilities and Fuel: 6.1 percent
Energy: -0.1 percent

CPI Year-Over-Year Select Components

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CPI Select Components Year-Over-Year Details

Utilities and Fuels: 6.1 percent
Energy: -0.1 percent
Gasoline: -7.5 percent
Medical Care: 3.2 percent

I expect all of those components will add significant upward pressure on the CPI month-over-month and year-over-year unless there is a strong recession.

Medical care will add very strong upward pressure, recession or not.

The only potentially offsetting factor is rent. However, rent will is much more important to the CPI than the PCE due to differing weights.

This report may be as good as it gets for a few months. I will posts more charts with an explanation why shortly.

Meanwhile, the labor market is falling apart. The best hope for CPI improvement is continued labor market weakness and a recession.

Hello. Let’s discuss affordability again.

Existing Home Sales

Existing-Home sales have been flat since October of 2022 at roughly 4,000,000 annualized sales for three full years. Only price insensitive buyers have been buying.

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