Here are the inflation details for January 2024 – in one chart

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People shop at a home improvement store in Brooklyn on January 25, 2024.

Spencer Platt Getty Images News | getty images

Inflation declined in January and consumers’ purchasing power increased as price pressures for US goods and services continued to ease.

consumer price IndexInflation, a key indicator of inflation, rose 3.1% in January from a year earlier, the US Labor Department said on Tuesday. This is less than 3.4% in December.

The CPI measures how fast the prices of everything from fruits and vegetables to haircuts, concert tickets and home appliances are changing in the U.S. economy.

Mark Zandi, chief economist at Moody’s Analytics, said that while the overall downward trend is encouraging, there were some “disappointments” beneath the surface, as inflation rose from December to January in categories such as shelter, food, electricity and airline fares.

Ultimately, he added, this is only a “brief deviation” from the broader deflationary trend, which is unlikely to proceed in a completely straight line.

“You get zigs and zags in all this data, and this was just one zag,” Zandi said. “The bottom line: Inflation continues to moderate. It’s still uncomfortably high – although… moving in the right direction. And apart from today’s data deviations all trend lines are still looking good.”

More purchases can be made from workers’ salaries

Inflation has declined significantly from its pandemic-era peak, 9.1% in June 2022. Around that time, the average consumer’s wages were not keeping up with rapidly rising prices. Their so-called “real earnings” – earnings after taking inflation into account – were negative. more than two years,

That dynamic has reversed: Workers’ hourly wages have exceeded the rate of inflation since May. In other words, their salary can buy more. Real average hourly earnings to rise 1.4% between January 2023 and January 2024, according to the Labor Department said on Tuesday,

According to a recent outlook written by JPMorgan’s Global Investment Strategy Group, normalizing inflation means consumers do not need to spend their “excess savings” to support spending.

Consumer sentiment jumped 13% in January to its highest level since July 2021, reflecting “an improving outlook for both inflation and personal income.” According For the University of Michigan.

Where inflation rate was highest in January

Cartons of orange juice on display in a grocery store in Los Angeles.

Mario Tama | getty images

Despite widespread deflation, there are specific categories where inflation remains relatively high.

According to the Labor Department, “notable” categories include motor vehicle insurance (where costs have increased 20.6% in the past year), entertainment (2.8%), personal care (5.3%) and medical care (1.1%).

For example, motor vehicle insurance and auto repair prices have increased. Prices of new and used cars rose sharply after earlier pandemic-era increases, albeit with some lag.

Additionally, shelter inflation has increased by 6% over the past 12 months. Housing is the largest component of the average household budget, and extremely high inflation in this category has driven up overall inflation readings.

Economists expect housing inflation to ease due to encouraging signs such as a softening of national prices for newly signed leases, a trend that takes months to be reflected in comprehensive inflation data.

“Everything suggests it’s going to happen,” Zandi said. “The hiatus is longer than I expected.”

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Other categories have retreated significantly.

For example, grocery inflation has declined to 1.2% over the past 12 months, from a peak of about 13.5% in August 2022. Some categories – such as frozen non-carbonated juices and drinks, sugar and beefsteak – however, remain high. Their prices have increased by 29%, 7.2% and 10.7% respectively.

Sugar prices, for example, were hit by “ongoing shortages and availability issues” in 2023, said Amy Smith, an economist at Advanced Economic Solutions.

Sugar is a major ingredient in juices and beverages, among other things; The latter were also affected by bad weather in Brazil and Florida, which reduced orange production and increased futures on frozen concentrated orange juice. reach all time high In November, Smith said. He said beef production was down about 5% in 2023, partly due to the impact of severe drought on pasture lands.

Meanwhile, total energy costs have decreased, or declined, 4.6% over the past year, with gasoline falling 6.4%, natural gas 17.8% and fuel oil 14.2%.

Why did inflation increase during the pandemic?

Inflation picked up in early 2021 as the U.S. economy reopened from its COVID-19-related shutdown.

During the pandemic, consumer demand for home goods surged as people spent more time at home and couldn’t spend on travel and other experiences. Amid supply chain disruptions, production of goods could not keep up with high demand.

According to Jay Bryson, chief economist at Wells Fargo Economics, this was a “double whammy” that caused prices to “skyrocket.”

Now, the supply chain and consumer demand for goods are largely back to normal, Bryson said.

Inflation on the “services” side of the economy — the intangible things we consume, like concerts, auto repairs and veterinary visits — is also falling but remains high, he said. Economists said a big reason for this is wage growth, as labor is a major input cost for service businesses.

As the economy reopened, demand for workers across businesses reached record highs, and wage growth reached its highest level in decades as workers made substantial gains in the job market. This increase has since slowed down Economists said the labor market has cooled from hot levels, causing inflationary pressure for services to ease but remain elevated.

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