PREVIEW: What to Look for in the January Consumer Price Index

February 08, 2022

(The monthly Consumer Price Index (CPI) is scheduled for release by the Bureau of Labor Statistics on Thursday, February 10 at 8:30 AM Eastern Time.)

With the January CPI, as with the December CPI, the big question is whether some of the supply chain-caused price hikes of 2021 are slowing or being reversed. The biggest item on this list is new and used vehicles. It seems that deliveries are improving, but probably not enough yet to cause prices to fall.

New vehicle prices rose 1.0 percent in December, while used vehicle prices rose 3.5 percent. Together, these components accounted for 0.16 percentage points to the December inflation rate. The figure for January will almost certainly be much smaller.

There is a wide range of other items with price jumps over the last year due to supply chain problems. For example, apparel prices rose 1.7 percent in December and 5.8 percent over the last year. The index for the category of household furnishing and supplies rose 1.3 percent in December and 7.4 percent over the last year. With inventories of many items now above normal levels, we should at least see these prices slow, if not actually decline.

The rise in price of many of these items is largely due to shipping costs. In the case of apparel, the overwhelming majority is imported. The price of imported apparel (which excludes shipping costs) has risen by just over 1.0 percent over the last year. This means we are seeing a story of rising shipping costs, not rising apparel prices. The story is similar in many other categories of goods.

There has been a modest acceleration in rents nationwide. This rise has been associated with a sharp divergence in trends between high housing cost areas like New York City and San Francisco, and lower cost areas in smaller cities, as well the Midwest and the South. The former has seen very low rental inflation, while rents have risen rapidly in the latter. This trend is likely to continue as increased opportunities to work from home allow many people to move to lower cost locations.

Finally, it is worth noting that we should focus more on the monthly changes, or three-month averages, rather than the commonly cited year-over-year change. We are interested in the pace of inflation going forward. The year-over-year figure tells us about inflation in the last 12 months, 11 of which we knew before the January CPI was released.

CEPR produces same-day analyses of government data on employment, inflation, GDP, and other topics. Follow @DeanBaker13 on Twitter to get his quick-take analysis of government data immediately upon release.

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