As it has been for going on two years, consumer inflation has boiled down to a contest of strength between energy (mainly gasoline), which peaked in June 2022 and roughed in June 2023, and housing, which peaked in early 2023 and has been gradually disinflation since.

The headlines, as you presumably already know, are that total inflation rose 0.3% in January, and 3.1% YoY, while core inflation (less food and energy) rose 0.4% for the month and 3.9% YoY.

To spare you a bunch of graphs, here is the Census Bureau’s spreadsheet. Go down the column at the far right and it is easy to see where the remaining problem areas are:

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The only sectors still up over 4% YoY are food away from home, transport services (mainly repairs and insurance), and - still - housing. The former problem areas of new and used vehicle prices are only up 0.7% and down -3.5% YoY respectively. Here’s what the first two remaining problem children look like YoY:

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Inflation in food away from home is still gradually disinflation, although it is still running about 2% above its YoY rate before the pandemic. Transportation services, however, have stopped decelerating for over half a year. Some of this may be due to the reputed consolidation in the auto repair industry, where the remaining players have more pricing power. Some are undoubtedly also due to the fact that there is still a 5-10 million vehicle “hole” in cumulative new vehicle production since the pandemic hit, meaning there are many more older vehicles on the road, and those vehicles need increasing repairs.

To show the effects of the tug of war between energy and housing, below are the YoY% increases in headline inflation (which has been bouncing around between 3.1% and 3.7% for over half a year, core inflation, which has been very gradually trending downward, energy (now down -4.6% YoY, /3 for scale), and CPI ex-shelter, which is up only 1.5% YoY:

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Once again, the only *real* inflation problem boils down to shelter.

Because an issue has been made by a few people about whether series like the Apartment List National Rent Index have been giving a true leading reading, here is the latest on that metric:

And here are the monthly% (blue, right scale) and YoY% (red, left scale) changes in the CPI for rent of primary residence:

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Before the pandemic, monthly changes in rent typically were in the +0.2% to +0.4% range. Monthly rent just entered that range again, at 0.4%, in January. Similarly, YoY rents typically increase by about 3.5%. In January, they were still at 6.1%, but the decelerating trend is very much intact. There is every reason to expect this decelerating trend to continue, and if it does so for the next nine months at the rate it has in the past nine months, YoY rent in the CPI will be about 3.4% - right in the middle of its pre-pandemic range.

Finally, here is this month’s update of the graph comparing house prices as measured by the FHFA Index (/2.5 for scale) with CPI for shelter; first, the long-term historical view:

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And here is the pandemic era close-up:

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Although house prices have resumed increasing in the past half year, the pace of those increases is in line with their pre-pandemic trend. This is to say that, although the pace of deceleration has itself decelerated, downward pressure is continuing on the CPI shelter index. And although CPI for shelter increased 0.6% in January, and is still up 6.1% YoY, that remains its lowest YoY increase since July 2022.

In other words, if there are no unpleasant surprises awaiting in the months ahead as to gas prices, we can expect headline inflation to continue to be fairly stable, and shelter to continue disinflating, leading to gradually lower core inflation readings as well.

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