The Consumer Price Index (CPI) advanced 0.5% in January, from the 0.1% increase seen in December (the monthly figure for December was revised slightly upwards). As a result, annual inflation stood at 6.4% (vs. +6.5% in December and +6.2% estimated). Core inflation, which excludes the most volatile categories such as food and energy, accelerated by 0.4%, causing its annual variation to register a rate of 5.6% (vs. 5.7% in December and +5.5% estimated).
In detail, the shelter index was the most significant contributor to the monthly increase of all items, representing almost half of the monthly increase. This category participates in more than a third of the index, rising 0.7% monthly and 7.9% in its annual comparison. Another relevant component, food (~14% within the index), increased by 0.5% in the month (+10.1% year-on-year). The food-at-home subcategory increased by 0.4% per month and 11.3% per year, respectively. In turn, the energy component surprised (~7% of the index) by rising 2% in the month (vs. -3.1% in December), with its annual figure reaching a rate of 8.7%. Within the main subcategories, the one referring to energy commodities advanced 1.9% monthly (+2.8% annually), while energy services rose 2.1% monthly (+15.6% annually). In particular, electricity rose 0.5% monthly (+11.9% annually). On the other hand, on a positive note, medical services (~7% of the index) fell 0.7% in the month (+3% annually), airfares (~1% of the index) fell 2.1% monthly (+25.6% YoY), and used cars and trucks (~3% of the index) were down 1.9% monthly (-11.6% annually).
In this context, we believe that this inflation report produces mixed results since, on the one hand, it continues to be phrased that the disinflation process continues its course, but at a slow and gradual pace, in which significant pressures on food products and those “sticky” components like shelter. This mix of factors influencing the behavior of inflation somewhat justifies the tone and hawkish stance that Jerome Powell has expressed, as well as various members of the Fed in different spaces since the beginning of the year, including the most recent FOMC statement for February.
