Consumer Price Index:Historical Releases/2022 December

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Full Report: https://www.bls.gov/news.release/archives/cpi_01122023.pdf

The Report was released on January 12 2023.

Summary

December 2022 CPI numbers came in line with expectations, markets remained mostly flat after the release. The market is now pricing a 93% of 25bps in the next FED meeting.

CPI declined 0.1 percent in December on a seasonally adjusted basis, after increasing 0.1 percent in November, over the last 12 months, the all items index increased 6.5 percent.

Excluding volatile food and energy prices, core CPI rose 0.3%, also meeting expectations. Core was up 5.7% from a year ago.

Biggest contributors:

https://www.bls.gov/news.release/pdf/cpi.pdf

The index for gasoline was by far the largest contributor to the monthly all-items decrease, more than offsetting increases in shelter indexes. Core CPI was mostly driven by shelter inflation. Weighing of CPI components

• Energy: -4.5% MoM, 7.5% YoY
• Used Cars: -2.5% MoM, -8.8 YoY
• Shelter: 0.8% MoM, 7.5% YoY

Categories watched by the FED:

The Fed has placed special attention in recent meetings to the Services inflation less housing for being the most sticky, it rose 0.4% MoM, and still remains high and away from their target.

• Core goods: 2.1% YoY

• Shelter: 7.5% YoY

• Services less shelter: 7.4% YoY

However, the three-month annualized rates already show signs that the rate of inflation in recent months is coming back to normal for most items, except for the shelter component, which is known to have a significant lag in the CPI data.

• Core goods: -4.8%

• Shelter: 9.2%

• Services less shelter: 1.2%

Assessment

The December 2022 CPI release confirmed the downward trend experienced in recent months, in line with the short term drivers, with more declines expected to continue in coming months.

Focusing on the services less shelter (present FED focus), it had a MoM (0.4%) increase greater than the headline number, to reached 7.4% YoY compare to 7.2% in previous month. But, the 3 month annualized rate already shows signs it could start to decelerate too.

At the moment, even though recent numbers can be taken with positivity,  they are still very high compare to the 2% target, so is not expected that the FED will change its curse of action. After December CPI numbers the most likely outcome will still be a 25bps rate hike in February meting, outcome that the market has already price in.

Past CPI expectations

January 12h 2023 inflation forecast is expecting a significant decline in inflation compared to last month, continuing with the trend we have seen in recent months and in line with short term inflation drivers pointing to an inflation rate moderating. However the level will remain high enough to not allow the FED to change its narrative of more rate hikes needed.

At the moment, 78% of the market is pricing 0.25 bps rate hike in February meeting.

Range:

• CPI: 6.4% - 6.7%
• Core CPI: 5.6% - 5.9%

If <6.4% could see a rally 4%

if >6.7% could see a drop 5%

Consensus forecast

	Forecast	Previous	Actual	Market Reaction
Core CPI (MoM) (Dec)	0.30%	0.20%	0.3%
Core CPI (YoY) (Dec)	5.70%	6.00%	5.70%	Flat
CPI (YoY) (Dec)	6.50%	7.10%	6.50%
CPI (MoM) (Dec)	0.10%	0.10%	-0.1%
CPI Core (MoM) (Dec)	0.3%?		0.3%

FED Cleveland Forecast

	YoY Change		MoM Change
Month	CPI	Core CPI	CPI	Core CPI
Jan-23	6.51	5.76	0.5	0.48
Dec-22	6.64	5.87	0.12	0.48

JPM Forecast

CPI Reading	Probability	S&P 500 reaction
> 6.6%	15%	Down 2.5% to 3%
6.4% - 6.6%	65%	Up 1.5%  to 2%
< 6.4%	20%	Up 3% to 3.5%

Specific institutions forecast

Institution	CPI Forecast
CIBC	6.3%
WELLS FARGO	6.3%
NOMURA	6.3%
BARCLAYS	6.4%
BANK OF AMERICA	6.4%
JP MORGAN	6.4%
MORGAN STANLEY	6.4%
UBS	6.4%
GOLDMAN SACHS	6.4%
GURGAVIN CAPITAL	6.5%
TD SECURITIES	6.5%
BMO	6.5%
CITI	6.5%
SCOTIABANK	6.5%
CREDIT SUISSE	6.5%
MEDIAN	6.5%