U.S. Inflation Data for January Once Again Higher Than Expected

U.S. consumer prices continue to exceed expectations, reaching the highest level in four months in January. Rising costs of shelter offset reduced prices in sectors like energy, apparel, and prescription medication. Furthermore, food prices also remained elevated.

In the headline figure for the month, U.S. consumer prices increased by 0.3% in January, after rising by 0.2% in December, the Labor Department said in its monthly report on the Consumer Price Index (CPI). The CPI is a closely watched inflation gauge that measures what Americans consumers pay for everyday items, ranging from coffee to cars. The widely reported consensus was a 0.2% monthly increase.

Overall, food prices for the month jumped by 0.4% following two consecutive 0.2% gains. Within the food category, grocery prices advanced by 0.4% after edging 0.1% higher. Additionally, dining-out expenses picked up by 0.5% following an increase of 0.3%.

Meanwhile, over the past year, food inflation has remained elevated at 2.6%, albeit slightly lower than the previous rate of 2.7%. Throughout this period, grocery prices saw a rise of 1.2%, while dining out costs surged by 5.1%. These numbers stand in contrast to their earlier rates of 1.3% for groceries and 5.2% for dining out.

In other sectors, prices at the pump dropped by 3.3% in January, contrasting with the previous month’s 0.6% slide. When looking at a year-on-year comparison, gas prices declined by 6.4%, compared to the previous fall of 1.9%.

The broader energy index, which includes items like gasoline, electricity, and fuel oil, fell by 0.9% in January, following a 0.2% dip in December. Energy prices year-over-year dropped by 4.6%, which compares to the previously recorded decline of 2%.

Excluding volatile food and energy components, the rate of core consumer prices in January rose by 0.4% against two consecutive 0.3% increases.

Shelter or housing prices increased by 0.6% during the month, marking their 45th straight monthly rise. This follows a 0.4% increase in December and represents another significant year-over-year growth of 6%.

"The index for shelter continued to rise in January, increasing 0.6 percent and contributing over two thirds of the monthly all items increase," the Labor Department’s monthly report said.

For some recent 12-month comparisons, they recorded increases of 6.2% in December, 6.5% in November, 6.7% in October, 7.2% in September, 7.3% in August, 7.7% in July, 7.8% in June, 8% in May, 8.1% in April, and 8.2% in March, posting their most significant annual increase since June 1982.

Components of shelter include prices of items like rent for apartments, rental equivalence, lodging away from home such as hotels and motels, and housing at schools. This index accounts for about one-third of the entire CPI.

In other closely watched pricing areas:

• Clothing prices declined by 0.7% for the month after registering flat previously. They edged up 0.1% from a year ago.
• New vehicle prices were flat in January following an increase of 0.2%. They showed a year-over-year increase of 0.7%.
• Prices for used cars and trucks fell by 3.4% during the month, after rising by 0.6% previously. In comparison to prices from a year ago, they have declined by 3.5%. These rates stand in stark contrast to the situation in February of the previous year when they experienced a sharp year-on-year increase of 41.2%.
• When compared to the previous year, airline fares dropped by 6.4%. As for the month, they rose by 1.4% following a 0.9% increase.

In terms of the headline annual rate, inflation rose by 3.1% for the 12 months ending January, down from the 3.4% inflation rate reported for the period ending in December. However, commonly reported expectations for the time indicated an advance of 2.9%.

For some perspective, there was a notable peak in the inflation rate at 9.1% during the 12-month period ending in June 2022. It was the quickest rate of inflation since November 1981. Additionally, until March 2023, inflation rates had been at or above 6% for 17 consecutive months.

Meanwhile, core inflation increased by 3.9% in the year through January, matching the prior core rate which was the slowest since May 2021. The widely reported consensus was a 3.7% annual increase. This core, "all items less food and energy" index is one of the benchmark inflation rates monitored by the Federal Open Market Committee (FOMC) to guide the central bank in setting its key interest rate.

"The much-anticipated CPI report is a disappointment for those who expected inflation to edge lower allowing the Fed to begin easing rates sooner rather than later," CNBC quoted Quincy Krosby, chief global strategist at LPL Financial. "Across the board numbers were hotter than expected making certain that the Fed will need more data before initiating a rate cutting cycle."

As recently as September 2022, the annual core inflation rate at 6.6% was the highest since August 1982. Many economists consider the core reading as a better predictor for future inflation.

The following table of key inflation figures is for the last seven months through January, as published by the U.S. Labor Department’s Bureau of Labor Statistics (www.bls.gov/cpi) on Feb. 13, 2024. To index the data each month, the BLS monitors the prices of about 80,000 consumer goods and services from around the nation. All monthly and annual pricing changes are in percentages.

July 2023 to January 2024 Consumer Prices – Gains & Losses in Percent
(Seasonally Adjusted from Prior Month and Unadjusted 12-Month)

The BLS releases inflation data around the middle of the month for consumer prices surveyed up to the previous month. The Consumer Price Index (CPI) for February and the latest annual period will be made public on March 14, 2024.

The CPI data is also used to calculate inflation rates and to power this site’s U.S. Inflation Calculator. The U.S. Inflation Calculator displays the cumulative inflation and the change in the buying power of the U.S. dollar over time.