In January 2024, the US saw a significant shift in its economic landscape. Core consumer prices (CCP), excluding volatile items such as food and energy, rose by 0.4% from the previous month, marking the sharpest increase since April 2023 and surpassing market expectations of a 0.3% rise. This acceleration, up from the 0.3% increase in the earlier period, challenged the gradual trend of disinflation in the US economy and bolstered the stance of hawks in the FOMC.
The rise was primarily driven by an uptick in costs of shelter and transportation services, which lifted the CPI for services less energy services. However, this was offset by a slowing inflation for goods, as the CPI dropped for used cars and trucks, apparel, and medical care commodities.
On an annual basis, the core consumer price inflation rate stood at a 2-1/2-year low of 3.9%, unchanged from the prior month but above market forecasts of 3.7%. Notable increases over the last year were observed in indexes such as motor vehicle insurance, recreation, personal care, and medical care.
Meanwhile, the overall consumer prices rose by 0.3% from a month earlier, the most in four months, surpassing market expectations of 0.2%. The index for shelter continued to rise, contributing over two thirds of the monthly all items increase. The food index also saw an increase, while the energy index fell, largely due to the decline in the gasoline index.
The annual inflation rate fell back to 3.1% in January 2024, higher than forecasts of 2.9%, following a brief increase to 3.4% in December. Energy costs dropped significantly, with declines observed in gasoline, utility (piped) gas service, and fuel oil. Prices increased at a softer pace for food, shelter, new vehicles, apparel, medical care commodities, and transportation services, and continued to decline for used cars and trucks. Despite these changes, the annual core inflation held steady at 3.9%, compared to expectations it would slow to 3.7%.
