CPI about in line, core rate highest since Sept ’08

Consumer prices in Jan rose .2% both headline and core. Headline was expected up .3% and core up .2%. The y/o/y gains are 2.9% including food and energy vs 3.0% in Dec and 2.3% without vs 2.2% last month. The core rate is now at the fastest pace since Sept ’08. Food and energy prices each rose .2% m/o/m. Owners Equivalent Rent, 24% of overall CPI and 40% of core, rose .2% for a 4th straight month. Rent of primary residence also rose .2%. As apartment landlords continue to gain pricing power, this trend will continue higher. Apparel prices rose .9% m/o/m and are now up 4.7%. Vehicle prices went down .4% led by a 1% drop in used car and truck prices. Commodity prices, 39% of CPI, rose by .3% and are up 4.0% y/o/y. Bottom line, the CPI index rose to another record high but after 9 months in a row of 3%+ y/o/y gains, it finally dipped below, barely to 2.9% and compares to the 1.9% y/o/y average hourly earnings gain seen in the Jan Payroll report. From a standard of living point of view, ‘Running to Stand Still’ unfortunately comes to mind. With respect to the Fed’s preferred measure of inflation, Bernanke has recently alluded to his focus more on the PCE price deflator rather than the CPI.

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