Consumer price inflation in the U.S. showed signs of cooling down last month, according to economists. They predict that prices will remain stable and the annual growth rate, as per Refinitiv data, will decrease to 3.1%.
Excluding volatile food and energy prices, the Core VPI increased by 0.3% compared to October. This equates to a yearly increase of 4%. In October, the Core VPI increased by 0.2% monthly and yearly by 4%.
Businesses might benefit from this stability in consumer price inflation, enabling them to make financial decisions with more certainty. Some companies might consider expanding production to cater to potential market demands.
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Though the consumer price inflation is cooling, it's a complex situation affected by various factors. Here's a breakdown based on the available sources:
Current Impact
- Yearly Inflation: The U.S. annual inflation rate for the 12 months ending January 2025 was 3%, a decrease from the previous increase of 2.9%[5].
- Latest Data: In January 2025, the Consumer Price Index (CPI) for All Urban Consumers rose by 0.5% on a seasonal adjustment, and 3.0% without seasonal adjustment over the past 12 months[4].
- Category-Wise Trends:
- Food Prices: Increased by 2.5% from December 2023 to December 2024, with food at home prices rising by 1.8% and food away from home prices increasing by 3.6%[1].
- Energy Prices: Dropped by 0.5% in 2024, a smaller decrease than 2.0% in 2023. Utility gas service prices increased by 4.9%, while gasoline prices dropped by 3.4%[1].
- Core Inflation: Expected to grow to 0.28% from 0.2% in December, indicating continuous inflation pressure in services and housing costs[2].
Future Outlook
- Headline CPI: Expected to decline, with a projected rise of 0.22% month-over-month, implying easing pressure in categories like energy and food[2].
- Core CPI: Predicted to display a pickup, accelerating to 0.28%, emphasizing continued inflationary pressure in services and housing costs[2].
- Inflationary Pressures: Despite the cooling headline CPI, structural inflationary pressures, especially in housing and services, still persist, complicating expectations for future Fed rate cuts[2].
- Consumer Spending Patterns: Robust consumer demand, particularly in non-essential spending categories, is expected to continue, potentially maintaining service price pressures[2].
In conclusion, while overall consumer price inflation is showing signs of cooling, specifically in energy and food categories, core inflation remains a major concern due to continuous pressures in housing and services. This disparity between headline and core CPI will be a significant focus for market and policymakers as they navigate the inflation landscape.
