 | The Consumer Price Index (CPI) Rose 0.1% in January |
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| Posted Under: CPI • Data Watch • Government • Inflation • Fed Reserve |
Implications: Consumer prices increased 0.1% in January, with prices rising in nearly every major category. Prices for housing, medical care, and food led the index higher in January, partially offset by a decline in the cost of gasoline. Consumer prices are up 2.5% in the past year, tied for the largest twelve-month increase going back to August of 2018. Strip out the typically volatile food and energy sectors, and "core" prices rose 0.2% in January. In addition to housing and medical care, prices for apparel, recreation, education, and airline fares pushed the core reading higher. Core prices are up 2.3% in the past year, just a tick off the highest annual increase we have seen since the recovery started. And "core" prices have hovered at or above the Fed's 2% inflation target for twenty-three consecutive months. Add in employment data continuing to show strength and it makes sense the Fed doesn't expect further rate cuts unless we see a material change in the economic outlook. On the wage front, average hourly earnings rose 0.2% in January and have increased 3.1% in the past year. Take out inflation, and "real" earnings rose 0.1% in January and are up a modest 0.6% in the past year. With the strength of the labor market, we believe earnings will trend higher in 2020. Healthy consumer balance sheets, a strong job market, inflation in-line with Fed targets, and the continued tail winds from improved tax and regulatory policy, all reinforce our belief that the economy will continue to grow at a healthy pace in the year ahead. In other news this morning, new claims for unemployment benefits rose 2,000 last week to a very low 205,000. Continuing claims fell 61,000 to 1.698 million. These figures are consistent with continued solid payroll growth in February.
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