INFLATION WATCH - back with a vengeance in January

Guess what's back? It's INFLATION WATCH!

JUST IN: Inflation ticked back up to 3% (y/y) in January --> the highest since June. The monthly gain was 0.5% (above expectations). Rent made up 30% of the increase. Gas and food also contributed. "Core CPI," which excludes food and gas, rose 3.3%. Core CPI has basically stalled since June.

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— Heather Long (@byheatherlong.bsky.social) February 12, 2025 at 7:39 AM

What's more concerning than the year-over-year numbers leveling off is the fact that the CPI has ticked up for each of the last 3 months.

This means CPI has gone up by an annualized rate of 4.8% for the last 3 months, and 3.6% for the last 6. And it's also worrying that core CPI was up by 0.4%, and an annuaized rate of 3.6% over the last 3 months. Sure, some of this is probably businesses jacking re-setting prices for the start of the year (something we saw last year as well), but there also isn't much to indicate prices will stop rising anytime soon.

For example, food at home (aka groceries) was up by 0.5% in January, and has gone up by a total of 1.2% over the last 3 months. Not surprisingly, this was led by a 15.2% increase in the price of eggs for January, but it also includes sizable increases in beef and veal (+0.7% Janaury and +3.4% in the last 3 months) and in pork (+0.7% in December and +1.9% over the last 3 months). Our current President sure spent last fall doing a lot of complaining about the prices of eggs and meat, so I'm sure he has a plan to get thse price increases under control.

No no you see he was misspelling a google search for "Biden inflation RP"

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— Son of a Programmer, Daddy (@videocrime.48minutesofdogsbarking.com) February 12, 2025 at 9:54 AM

Nope, nothing. Well, except for tariffs on aluminum and other products, which will (wait for it....) RAISE prices that consumers pay.

That high CPI number and new tariffs is going to make it even less likely that Fed Chair Jerome Powell will lower interest rates any time soon, no matter how much Trump/Musk want it to happen (cough - HEAVILY INDEBTED - cough). But it does make me wonder if Trump/Musk try to make January the last time the Bureau of Labor Statistics tells the full truth about what's happening with prices in this country.

We've got producer prices and retail sales information coming in the rest of this week. Let's see if prices are likely to stay high in the coming months, and see if consumers cut back in January as the prospect of a 2nd Trump Administration and tariffs loomed. If so, you might start hearing the "s" word being thrown around that no elected official wants to hear - stagflation.

We're not there yet, but the trend of the last couple of months and the Trump/Musk policy agenda sure don't make me think that it's a short-term blip and we'll be back to lower price increases and better growth soon.