Thursday, March 23, 2023
HomeMarketAnother Inflation Report Is Coming. What to Expect.

Another Inflation Report Is Coming. What to Expect.

- Advertisement -

Consumer price growth cooled in January to its slowest annual rate in more than a year, according to economists’ estimates, even as recent gains in the cost of gasoline and groceries could mean the monthly pace of inflation is once again rising.

Economists expect consumer price growth slowed in January to a 6.2% annual pace, marking a step down from December’s 6.5% pace and notching the seventh straight month of declines in the annual pace of inflation. The closely watched headline CPI has been falling steadily since June, when annual price growth peaked above 9%, and is on track to reach its lowest level since October 2021 if the data comes in line with forecasts.

But the month-to-month changes have been more varied, and prices climbed between December and January, according to consensus expectations. Economists surveyed by FactSet expect the CPI rose 0.5% last month, up from a 0.1% increase the month before.

Excluding the volatile food and energy sectors, so-called core CPI is expected to have climbed 0.4% in January. That would match December’s rate and push the annual pace of growth in the core CPI to 5.7%, up slightly from the previous month’s 5.5%.

What will matter most for the Federal Reserve is the specific categories in which inflation continues to run hot. The central bank has been largely focused in recent months on what some economists call supercore services, or services sectors excluding energy and rent. 

There, January’s report could present something of a mixed bag. Bank of America economists expect medical services to have declined, for example, due largely to the health insurance component. But they expect transportation services to jump up from a 0.2% monthly rise in December to a 0.7% gain in January.

The shelter category, meanwhile, is likely to continue rising in January due to another rise in rental prices. Economists widely expect rent prices to come down in the coming months because private-sector data, which measures the category closer to real-time, has already seen prices fall for new leases. But that isn’t reflected in last month’s data, economists say.

Core goods prices—the third category Fed officials have been watching closely—have been falling in recent months, which has helped to drag down the core rate of inflation overall. But some economists expect used car prices rose in January, which could limit the amount of deflation seen in core goods overall.

One question moving forward is whether core goods prices will start to reaccelerate before shelter prices begin to fall. That could mean the headline rate of inflation starts to rise again, reversing the trend of recent months.

“We suspect inflation could turn out to be a bumpier ride over the coming months if the disinflation taking place in the goods components is easing before the expected disinflationary impulse from the shelter and core services components starts to take effect,” says Richard de Chazal, a macroeconomics analyst with William Blair equity research.

The Labor Department will release the CPI data at 8:30 a.m.

Write to Megan Cassella at


- Advertisment -

Most Popular