Year-over-year inflation declined in January but at a slower pace. Inflation remains elevated and much higher than the Federal Reserve’s target. Inflation impacting lower-income households remains extremely high.
Retail sales increased more than expected in January. Adjusted for inflation, retail sales were unchanged year over year. Most categories are up year over year, and the consumer has definitely not thrown in the towel.
Residential construction trends were mixed in January, but single-family is continuing to decline in permits and starts.
Initial jobless claims declined in the latest week, but continuing claims continue to increase yet remain below pre-pandemic levels.
Inflation Declined Year Over Year but at a Slower Pace
According to the Consumer Price Index, year-over-year inflation declined in January but at a slower pace. As expected, the headline aggregate measure increased by 0.5% on a seasonally adjusted basis. The increase followed an upwardly revised 0.1% increase in December.
The core CPI, excluding Food and Energy, increased by 0.4%, the same as in December. Energy prices rose in January as gasoline and gas utility services increased, contributing to inflation. However, shelter and some other services, such as medical care services, saw decelerating price growth or outright declines.
Used-car prices and airline fares saw large declines. New-vehicle prices saw decelerating gains, and notably, the decline for new-vehicle prices in December was revised to an increase, which is more consistent with what we have observed in actual new-car prices, according to Kelley Blue Book average transaction prices.