CPI data for January offered a slight surprise on the negative side, suggesting that the specter of inflation is yet to be fully exorcised from the US economy. The first month of 2023 saw month-on-month gains in food (0.5%), energy (2%), and the overall index (0.5%), reversing the declining trend of previous months.  In annual terms, prices were up 6.4% year-on-year, down from 6.5% the month before.

January’s 0.5% increase in food prices reverses the declining trend of December 2022, which recorded a 0.4% increase; prices had otherwise been trending downward since July’s 1.1% month-on-month gain. In annual terms, food prices are still up in the double-digits at 10.1% through January, with major gains across categories such as cereals and bakery products (15.6%) and dairy and related products (14%).

Other political headaches are lurking in shelter and transportation costs, both of which are not moving in an ideal direction despite the Fed’s ongoing tightening cycle. Shelter is down month-on-month, but not by much at 0.7% (0.8% in December); shelter costs remain up 7.9% year-on-year. Transportation services on the other hand saw a steeper increase at 0.9%, up from 0.6% in December and 0.3% in November, reaching year-on-year increases of 14.6%. On the positive side, the downward trend in vehicles sales was maintained, with new vehicle costs growing 0.2% monthly (down from 0.2% the month before), and used vehicle costs continued to deflate month-on-month at -1.9%.

Energy, which along with food has been the driving force behind price movement of late, saw a steep monthly increase of 2%.