The Bureau of Labor Statistics released the Consumer Price Index (CPI) for January 2023 on February 14th. The annual increase was 6.4 percent, slightly higher than the 6.3 percent expected but down from 6.5 percent annual rate in December 2022. Core CPI was up 0.4 percent for the month compared to 0.3 percent in December. The category of Services (less food and energy) was up 0.5 percent to an annualized value of 5.6 percent, demonstrating persistence in this category. Energy was up 8.7 percent year-over-year with 2 percent for the month. Food was up 10.1 percent with an increase of 0.5 percent for January. Easing was demonstrated in used cars, down 1.9 percent and medical care 0.7 percent lower.
The February release of the Producer Price Index (PPI) surprised economists at 0.7 percent up in January compared to a projection of 0.4 percent. This index declined by 0.2 percent in December 2022. Core PPI was 0.5 Percent in January 2023 compared to an estimate of 0.3 percent.
The January Retail Sales Report documented a 3.0 percent rise in spending up 6.4 percent from January 2022.
The Conference Board Leading Economic Index was down 0.3 percent in January an improvement over December 2022 at -8.0 percent.
The January data confirms persistence of inflation as noted in the recent address by Federal Reserve Chairman, Jerome Powell and it is, therefore, anticipated that interest rates will be increased over subsequent FOCM monthly meetings. The CME Group anticipates three more increases in 2023 with a terminal rate of 5.25 to 5.50 percent. Chairman Powell does not anticipate restoration of a two percent inflation rate until mid-2024. Economists are divided as to whether the appropriate action taken by the Federal Reserve will result in a mild recession but it is generally considered that in this event, the decline in growth rate will be of short duration.