Consumer Price Inflation Hotter Than Expected Despite Goods Deflation

After jumping in December, analysts expected a modest acceleration in headline consumer prices and small slowdown in core prices, but the headline CPI printed hotter than expected at +2.5% YoY (despite only rising 0.1% MoM) - that is the hottest since oct 2018.

Source: Bloomberg

The index for all items less food and energy increased 0.2 percent in January, after rising 0.1 percent in December. The shelter index rose 0.4 percent in January, with the rent index increasing 0.4 percent and the owners’ equivalent rent index rising 0.3 percent.

Notably the gap between CPI and The Fed's preferred indicator of inflation is at its highest since 2011...

The medical care index rose 0.2 percent in January, with the index for hospital services increasing 0.8 percent. However, the index for physicians’ services fell 0.4 percent, and the index for  prescription drugs also declined 0.4 percent over the month.

The apparel index rose 0.7 percent in January following a 0.1-percent increase in December. The recreation index increased 0.3 percent over the month, as did the education index. The index for personal care advanced 0.7 percent in January after feclining 0.2 percent the previous month. The airline fares index rose 0.7 percent, after declining in each of the 3 previous months. The index for new vehicles was unchanged in January.

The index for used cars and trucks continued to decline, decreasing 1.2 percent in January after falling 0.4 percent in December. The index for motor vehicle insurance fell 0.2 percent in January. The index for household furnishings and operations also declined in January, decreasing 0.1 percent.

From the top-down, Services inflation is running at +3.1% YoY (the last time it was hotter was August 2016) while goods prices are deflating YoY...

Source: Bloomberg

Finally we note that Real Average Weekly Earnings are flat year-over-year...

Source: Bloomberg

So take your pick Jay Powell.