Last month, I wrote a post forecasting the CPI monthly reading in Jan.
https://www.reddit.com/r/stocks/comments/zpnu39/why_december_cpi_numbers_are_likely_going_to_show/
It came out to -.1%.
The January reading is due out next week (2/14 I believe). What has changed over the past month?
Gas has gotten more expensive, by a decent amount. It is nowhere near what it was last year at peak but retail prices did rise approx 10% between Dec and Jan (they are now falling again and Brent Crude is back below $80 which may portend additional downward price pressure heading into spring). While “gas” is up a bit, natural gas prices have absolutely PLUNGED. Other commodities also seem to be down a bit. These could cancel each other out in monthly noise before the drop in Brent signals additional deflationary pressure in energy come the next CPI reading in March.
I think the big number to watch for will be rent, which is reportedly now declining –
https://www.rent.com/research/average-rent-price-report/
This was not shown in the Jan release (Dec #s) for CPI, so the rental headwinds that have taken long to build and are now picking up steam should finally begin showing in the numbers come Feb and beyond.
What does this mean for the Jan monthly? I think the picture is mixed given the increase in gas prices, decline in other prices, and uncertainly re: rent #s as what actually makes it into CPI is different from the various web reports on national rents. HOWEVER, if the rental component comes in negative, this could be an anchor to a negative monthly number, and it could also portend a more severe disinflationary / deflationary trajectory as we head into end of Q1 and Q2, assuming Brent Crude continues its downward trend as well. I think there is less certainty for the upcoming report vs Jan's for these factors, however the number is probably going to come in around 0 / -.1-.2% once again, though if rents do swing negative the drop could be more severe.
Leave a Reply