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Both headline and core CPI saw one-tenth greater-than-expected prints for January, up 0.3% and 0.4% month-over-month, respectively. The year-over-year gains were two-tenths above the estimates, up 3.1% and 3.9%, respectively, versus 3.4% and 3.9% in the month prior. The data is a reminder that while inflation is decelerating in its rate of change, hitting a target of 2% is not going to be just a snap of the finger, explains Peter Boockvar, editor of The Boock Report.

Energy prices were lower by 0.9% month-over-month and 4.6% year-over-year, partly offset by a 0.4% month-over-month and 2.6% year-over-year rise in food prices. Eating out of home remains expensive, with full-service meal prices up 0.4% month-over-month and 4.3% year-over-year, while quick-service prices are higher by 0.6% month-over-month and 5.8% year-over-year.

Services prices ex-energy jumped by 0.7% month-over-month and 5.4% year-over-year. Rent of Primary Residence saw prices up 0.4% month-over-month and 6.1% year-over-year, while Owners’ Equivalent Rent was higher by 0.6% month-over-month and 6.2% year-over-year. Both are well above current reality, but they were well below when rental prices were spiking over the past few years.

Medical care costs are now really jumping, in part because of the more realistic health insurance calculations (up 1.4% month-over-month, and they have been rising 1%+ each month since late last year). They rose 0.5% month-over-month versus 0.4% in December and 0.5% in November.

Price gains for auto insurance are out of control, spiking by another 1.4% in January alone after a 1.7% increase in the month before. They’re up 20.6% year-over-year. Fixing your car is pricey, too, rising 0.8% month-over-month and 6.5% year-over-year.

Travel got expensive again, as hotel prices jumped 2.4% in January after a one-tenth rise last month. They are up a more modest 0.6% year-over-year. Airline fares were higher by 1.4% month-over-month, though down 6.4% year-over-year.

On the core goods side, prices fell 0.3% month-over-month, continuing the disinflation seen in this category. They are lower by 0.3% year-over-year. Used car/truck prices fell a sharp 3.4% in the month and are lower by 3.5% year-over-year. New car prices were unchanged vs. December and up 0.7% year-over-year.

Apparel prices fell 0.7% month-over-month and are flat year-over-year. Prices related to the home fell one-tenth month-over-month and by 1.3% year-over-year. With the pace of existing home transactions at the lowest level in almost 30 years, there is obviously going to be less demand for carpet, paint, furniture, flooring, etc.

While we'll see continued moderation in rental inflation, medical care costs are now accelerating (which is the biggest weight in PCE), particularly in health insurance. Wages are still running well above the pre-COVID-19 pace, the cost of insurance for everything is rising off the charts, and eating at a restaurant continues to get more expensive.

On the goods side, we're back to the pre-COVID-19 pace of basically zero. But with rising transportation costs and the possibility of a turn toward inventory restocking, they may curl up again. Lastly, oil recently reached $77 again, and the average gallon of gasoline is at the highest level since early December.

About the Author

Peter Boockvar is the chief investment officer at Bleakley Financial Group, a NJ-based wealth management firm. He is also the editor of The Boock Report, a macro market newsletter. Prior to joining Bleakley, he was the chief market analyst at The Lindsey Group, a macro economic and market research firm founded by former Federal Reserve Governor Larry Lindsey.

Before this, Mr. Boockvar worked as a macro analyst and portfolio manager for a brief time at Omega Advisors and had previously been a partner at Miller Tabak + Company where he was the equity strategist and a portfolio manager.

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