Data for January do not change the overall picture of US inflation that is a low rate of inflation that stopped decelerating but still did not start accelerating either.
Consumer prices were up 0.1% m/m in January, with a small contribution from food and energy, which prices were up only slightly. Core prices thus rose in line with the headline. On a year-on-year basis, this resulted in a slight acceleration in the headline rate of inflation (from 1.5% to 1.6%) and a slight deceleration in core inflation (from 1.7% to 1.6%).
The usual measure of producer prices highlights a slight acceleration. The index for core finished goods was up 1.7% in January, after 1.4% in December and an average of 1.2% over the previous five months. The new measure of producer prices for final demand also shows an acceleration, but tamer, as the year-on-year rate of inflation came up from 1.1% in December to 1.2% in January, and from 1.1% to 1.3% when food and energy prices are excluded. Still, the subcomponent for consumer goods highlights a greater acceleration. Excluding food and energy, the PPI for these goods gained 2.1% in January, after +1.7% in December and a cyclical low of 1.5% in November. That acceleration mainly comes from nondurable goods, and it was noticeable in import prices as well.
The disinflation trend in non-durable goods prices is easing. However, it is not the case for services. Admittedly, the PPI for personal consumption services, which year-on-year rate of growth had touched a cyclical low of 1.2% in December, rebounded to 1.4% in January, but that development was mainly related to base effects, as the index was flat on a month-on-month basis.
However, as the unemployment rate remains way above its natural rate, there is no reason for inflation to move back close to the Fed’s target anytime soon.
BY Alexandra ESTIOT
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