Consumer Prices Rise Slightly More Than Expected

Consumer prices are on the rise and the Fed's December rate hike doesn't look misplaced at all. Core price jumped 0.3 percent in January which beats Econoday's top-end estimate with the year-on-year rate up 1 tenth to plus 2.2 percent. The Bureau of Labor Statistics notes a "lack of declines" across core readings. When including energy, however, and also food, total prices were unchanged in the month though the year-on-year rate literally surged, up 7 tenths to plus 1.4 percent.

Services are the center of the economy's strength and prices are rising, led by medical care which jumped 0.5 percent in the month for a year-on-year plus 3.0 percent. The subcomponent for prescription drugs also rose 0.5 percent. Shelter rose 0.3 percent in the month as did rent while owner's equivalent rent rose 0.2 percent. Away-from-home prices jumped 2.0 percent.

Goods prices are mixed with apparel jumping 0.6 percent in the month but with energy down 2.8 percent and gasoline down 4.8 percent. Food prices were unchanged. The only core reading showing any contraction was home furnishings and only at minus 0.1 percent. New vehicles rose 0.3 percent with used vehicles up 0.1 percent. Airfares were especially hot, up 1.2 percent in the month.

These results may prove to be a game changer for the FOMC, pointing to pressure for next week's PCE price data and perhaps reviving chances for a March FOMC rate hike.

Recent History Of This Indicator:
Deflationary pull from Chinese imports as well as falling energy and commodity prices have been keeping down consumer prices which nevertheless have been showing some life. But little to no life is expected for the January report with the Econoday consensus calling for a headline minus 0.1 percent with the ex-food ex-energy core rate little better at plus 0.1 percent. The year-on-year rate for the December core came in above the Fed's 2 percent target at 2.1 percent, but 2.1 percent is far above the 1.4 percent rate for the PCE core which is the Fed's preferred reading.