January Consumer Price Index

Consumer prices expanded by 0.2 percent in January according to the most recent data from the Bureau of Labor Statistics; this follows a total of 0.1 percent growth in the prior three months.  Year-over-year, CPI has increased 2.9 percent.  After excluding the volatile food and energy components, “core” inflation moved up 0.2 percent and now has a gain of 2.3 percent over the last 12 months.  

The year-over-year growth figures are fairly consistent with the price increases seen over the last three decades or so.  The impact of energy and food is diminishing from the headline number, but the “core” components are gaining momentum, so we are starting to see the two measures getting closer to converging. As I write this, I cannot help but remember the near $4.00 a gallon I’ve been paying recently for gas, so the muted impact of energy may be short lived, especially as we head toward even warmer months associated with travel; there are also geo-political threats to oil prices still looming.

For now the inflation situation reads relatively normal.  Traditionally, the additional money being created by central banks around the globe would create above average price increases, but something is restricting the price movements from occurring.  Atlas believes the weak wage growth due to an anemic labor market coupled with continued deleveraging is overpowering the blossoming money supply, but we have also noticed the “core” trend has been moving steadily higher in the last year and will be on the lookout for additional signs of price pressures.