Saturday, February 18, 2023

Inflation Accelerates Past Expectations Again

Inflation Accelerates Past Expectations Again

AP Photo/Mark Lennihan

Consumer inflation in the United States turned around and moved back in the wrong direction to kick off 2023, with the Consumer Price Index showing a month-over-month increase of 0.5 percent in January — accelerating from December 0.1 percent — for a hotter-than-expected annual advance of 6.4 percent, according to the latest data out Tuesday morning. 

According to the Bureau of Labor Statistics, inflation's spike in January saw the cost of shelter as "the largest contributor to the monthly all items increase, accounting for nearly half of the monthly all items increase, with the indexes for food, gasoline, and natural gas also contributing."

That is, inflation is still raging in the three items all Americans need most: shelter, food, and energy. 

The core CPI number — excluding more volatile food and energy — increased 0.4 percent in January for an annual increase of 5.6 percent, also hotter than expected. 

Overall, the food index saw inflation of 10.1 percent in the last 12 months while the energy index rose 8.7 percent.

As Townhall reported earlier in February, the jobs report for January showed wage growth of 0.3 percent in January and 4.4 percent over the previous 12 months. That means Americans are seeing their incomes lagging behind inflation by two full percent, continuing the negative real wage movement that the Biden administration hasn't managed to turn around. 

Digging into the latest CPI data, it's clear that prices for common necessities are still not coming down and some are spiking even more in the new year. 

In the last 12 months, the cost of eggs has increased 70.1 percent, airline fares remain up 25.6 percent, pet food grew 15.1 percent, household paper products climbed 12.9 percent, piped utility gas service increased 26.7 percent, food at elementary and secondary schools spiked 301.9 percent, soups increased 16.5 percent, butter jumped 26.3 percent, frozen vegetables advanced 18.6 percent, lettuce jumped 17.2 percent, bread climbed 14.9 percent, and cereal costs grew 15.6 percent.

Clearly, inflation is not going away just because President Biden waved his shaky finger and declared his Inflation Reduction Act would live up to its false name. The accelerating CPI read for January is likely to make the Federal Reserve and its chair Jerome Powell lean toward more hawkish interest rate hikes since their record-breaking number of consecutive rate increases haven't managed to bring inflation down despite rates being at their highest level since the financial crisis of 2007-08. 

The next Fed decision is expected in March, with another round of CPI and employment reports from February due out before then.

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