Media may say it was a good month for INFLATION WATCH. But maybe not in the Real America

Another report on INFLATION WATCH hit on Friday, and on the surface, it showed price growth was moderating in the first month of 2026.

Inflation rose just 0.2% in January from December and fell to 2.4% on an annual basis. Both readings were less than anticipated, in a positive sign for consumers.

Broadly, economists surveyed by Dow Jones expected inflation overall to have risen by 0.3% in January. On an annual basis, the expectation was that inflation would be tracking at 2.5%.....

The Bureau of Labor Statistics said that the price of housing “was the largest factor” in the increase for the month, rising 0.2%. The same went for the “food at home” category, which tracks grocery prices.

The price of energy was among the biggest drops in January, falling 1.5%.

Core inflation, which strips out volatile categories, was also right in line with expectations. That could help bolster the argument that recent rate cuts and actions by the administration are working to bring inflation under control after it soared to 3% in September last year.

The year-over-year trends certainly seem to be going in the right direction, even if prices are still rising.

But if price pressures are easing, why are people so upset about things these days? Part of it might be because prices went up in Real America in January more than what the headline numbers would tell you. That's because the models that the Bureau of Labor Statistics has an expectation that prices will go up in January, and lowers the "official" seasonally-adjusted numbers in their CPI report.

In this chart, the change on the left is the change in actual prices, while the the change on the right is what gets reported after the BLS's seasonal adjustment.

Of course, those seasonal adjustments will inflate some of those same categories later this year, and the year-over-year increases do show some moderating. But I'll also note that the decrease in gas prices is certainly reversing in February, after the Trump Administration's shenanigans in Venezuela and the occasional sabre-rattling against Iran (oil companies can't survive with barrels under $60, you know). And the usual Springtime rise in gas prices seems to be happening earlier this year.

One other item I want to point out on the CPI report is that the costs for health insurance might not reflect what everyday Americans are paying. It lists the cost of insurance as only 1% of a typical month's expenses, while actual health services are another 6% of total expenses. These services also seem to reflect "full price" of those services, but does not account for the cost share between any subsidies that pay for those services and insurance. For a lot of Americans, the assistance they got went down at the start of the year, and they paid more for premiums and services, but that reality isn't showing up in many of these stats.

Bottom line - despite the good headlines that you may have seen on Friday in regards to the Consumer Price Index report, American consumers are still facing higher prices, and while the amount of increase may be moderating, the cost of living is still a significant problem for normal Americans. And flattening wage and job growth is an extra complication that wasn't there in previous years.