Inflation Update – Still Benign

Inflation remains benign based on data released by the BLS and the latest reading from the Orcam Housing Adjusted Price Index.  According to the BLS consumer prices rose at a modest rate of 1.7% year over year.  The softness in the headline reading came from declines in energy prices which were down 1.2% over the year.  The core reading was unchanged on the month at 1.9%, a bit higher than the headline and still consistent with accommodative Fed policy.

Here’s the BLS with a bit more detail:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.

The gasoline index declined again in December, but other indexes, notably food and shelter, increased,
resulting in the seasonally adjusted all items index being unchanged. Gasoline was the only major energy index to decline; the indexes for natural gas and electricity both increased. Within the food category, five of the six major grocery store food groups increased as the food at home index rose for the
third consecutive month.

The Orcam Housing Adjusted Price Index was a bit higher on the month at 2.84%.  The divergence in the OHAPI and the CPI has grown in recent months primarily due to the rise in housing prices which are beginning to ripple through the economy.

All in all, prices are still relatively benign.   Not a big surprise given the lack of cost push inflation from energy prices and the lack of demand pull inflation from the weak economy….

( Figure 1 – Inflation Indices via Orcam)