U.S. January Median CPI at 11-Month High
The Cleveland Fed’s Median CPI for January confirms the relatively broad based nature of the upside CPI surprise, rising by 6.5% annualized, its strongest increase since February 2023.
The strength of the CPI was concentrated in services with goods still seeing deflation as supply conditions improved, but strength in services is still broad enough to deliver a strong Median CPI. Yr/yr growth was unchanged from December at 4.9% and the slowing from the peak of 7.2% seen in February 2023 may be losing momentum. Trend has slowed significantly since then, but only two months (July at 2.5% and October at 3.5%) have seen annualized gains of less than 4.0%. Despite the progress made, the resilience of the economy is helping to sustain inflationary pressures.
A growing discrepancy appears to be emerging between the relatively resilient CPI and the more significantly slowing PCE price data. The Cleveland Fed also releases a median PCE price series and that in December was up by 3.8% yr/yr, with seven of the last eight months seeing monthly gains of less than 0.3% before rounding (not annualized), the expecting being a 0.37% rise in September 2023. CPI data is particularly sensitive to owners’ equivalent rent, which was particularly firm in January.