Consumer Price Index (CPI) inflation increased 0.4% in December, which was right in line with expectations. Headline inflation was most effected by the volatile energy category, which increased 2.6% for the month.
CPI is up 2.9% over the last 12 months; up from 2.7% increase over the 12 months ending in November. It’s the 3rd straight annualized increase in the CPI.
Core CPI (which excludes the volatile food & energy prices) increased 0.2% in December, which was better than the 0.3% that the market was anticipating.
Core inflation is up 3.2% from last year, but that is the slowest rate of price increases in 3.5 years.
Breaking down the monthly price increases by category, all but one category (medical care commodities) was higher, with energy clearly the biggest driver of inflation for December.
On an annualized basis, 7 of 10 consumer categories are higher than a year ago. Transportation, shelter, and services inflation lead the way, while energy and vehicles being the laggards.
In response to the data, the US dollar is down about 0.5% this morning. What would be the 3rd straight down day after hitting resistance around $110.
Rates are also falling after the data release. The 10 year rate is back below the 2024 high point. A welcome outcome for equities. The combo of falling USD and rates are easing financial conditions. At least for now.
As a result, the market is up over 1.5% so far. Looks like a retest of the downtrend line is in the cards; although the midpoint of this current pullback (red line) and the 50 day moving average (white) still stands in the way.Inflation was a little better than anticipated, but this was by no means a big win. Headline inflation still increased at a higher rate than the last few months, and core inflation is still over 50% above the Fed’s price stability mandate.On the earnings front, banks kicked off Q4 results with an overall positive tone. I’ll provide more details later today.More By This Author:Small Business Optimism Continues Surge, Hits 6 Year High Job Gains Beat Expectations In December, But The Slowdown Is Still Real Financial Conditions Tighten In Response To Recent Data