Inflation remains but a distant potential problem in the US. The January CPI rose 0.2% MoM, 2.6% YoY.
Core CPI fell 0.1%, 1.6% YoY. Core CPI is unchanged in the last 3 months and up only 1.0% annualized in the last 6 months.
This decline was largely the result of decreases in the indexes for shelter, new vehicles, and airline fares. In contrast, the medical care index posted its largest increase since January 2008, and the index for used cars and trucks increased significantly for the sixth month in a row.
The food index increased in January, with the food at home component posting its largest increase since September 2008. Sharp increases in the indexes for dairy and related products and for fruits and vegetables accounted for most of the increase.
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They’ve taken food and energy out of the “inflation index” I’m just wondering if they’ve taken the inflation out too now? If you look at the PPI of +4.6% Year Over Year, I’m wondering if the manufacturers, who actually have to buy things for their manufacturing processes are believers in no inflation and I’m also a bit curious as to why there’s an absence of belief that this cost will not be passed on to consumers?
You are right. Manufacturers are indeed saying that their input costs are rising. However, the continued weakness in final demand prevents them from passing these cost increases along to the end consumer. How long will this margin squeeze go on? Only when employment will begin to rise are we likely to witness stronger final demand. In the meantime, core inflation remains muted and everybody is impacted by rising ”non-core” inflation.