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Consumer Price Index: Difference between revisions
→Near-term inflation drivers
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==Near-term inflation drivers== | ==Near-term inflation drivers== | ||
Near-term inflation | Near-term inflation treand are still in line with a continued decline in inflation in the coming months. | ||
Housing CPI lags, and wages still above average could keep inflation above the 2% target for a while. | Housing CPI lags, and the fact the wages are still above average could keep inflation above the 2% target for a while. | ||
Important to consider that the housing market, auto market, and energy market have all stabilized during January 2023, and even saw an increase in prices. If this continues in coming months, we could experience a new wave of upwards price pressures in CPI. | Important to consider that the housing market, auto market, and energy market have all stabilized during January 2023, and even saw an increase in prices. If this continues in coming months, we could experience a new wave of upwards price pressures in CPI. | ||
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===2. Supply chain issues=== | ===2. Supply chain issues=== | ||
Supply chain pressures have | Supply chain pressures have returned to normal in February; this trend has been helping with good disinflation in past months. However, the recent stabilization could mean a limited effect on CPI going forward. | ||
*Global supply chain pressures decreased | *Global supply chain pressures decreased considerably in February and are now below the historical average.<ref name=":2">https://www.newyorkfed.org/research/policy/gscpi#/interactive</ref> | ||
* | *There were significant downward contributions by the majority of the factors, with the largest negative contribution from European Area delivery times.<ref name=":2" /> | ||
===3. PPI=== | ===3. PPI=== | ||
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*PPI has been in a significant declining trend since Q2 2022, declining more than 5%. CPI has been following the same behavior in recent months and is expected to continue <ref name=":1">https://tradingeconomics.com/united-states/producer-prices-change</ref> | *PPI has been in a significant declining trend since Q2 2022, declining more than 5%. CPI has been following the same behavior in recent months and is expected to continue <ref name=":1">https://tradingeconomics.com/united-states/producer-prices-change</ref> | ||
* | *PPI slowed for a seventh straight month to 6% in January of 2023, the lowest since March of 2021, from an upwardly revised 6.5% in December, but above market forecasts of 5.4%<ref name=":1" /> | ||
===4. Housing Market=== | ===4. Housing Market=== | ||
Shelter CPI is the biggest component in the core CPI for the US. The weighted shelter takes up 32.77% of CPI, of which 7.8% is rent and 23.68% is private housing, | Shelter CPI is the biggest component in the core CPI for the US. The weighted shelter takes up 32.77% of CPI, of which 7.8% is rent and 23.68% is private housing, | ||
*Home prices have started to decline since July 2022<ref>https://tradingeconomics.com/united-states/case-shiller-home-price-index-mom</ref>, but due to the lagging shelter CPI data, this will start to be reflected in CPI until the second half of 2023. | *Home prices have started to decline since July 2022<ref>https://tradingeconomics.com/united-states/case-shiller-home-price-index-mom</ref>, but due to the lagging shelter CPI data, this will start to be reflected in CPI until the second half of 2023. | ||
*The S&P/Case-Shiller Home Price Index in the United States decreased 0.9% month-over-month in December of 2022, marking a sixth consecutive month of declines in house prices. However YoY, is still positive at 4.6%. | |||
===5. Energy=== | ===5. Energy=== | ||
*Oil prices have come down significantly since the peak to around $ | *Oil prices have come down significantly since the peak to around $76, below pre-war levels<ref name=":0">https://oilprice.com/oil-price-charts/45</ref>. Prices increased in January 2023 from 75 to 77, a small increase. | ||
*Futures market pricing | *Futures market pricing prices decline in coming months.<ref>https://www.cmegroup.com/markets/energy/crude-oil/light-sweet-crude.quotes.html</ref> | ||
*Gasoline | *Gasoline prices decreased in February 2023. <ref>https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=emm_epm0_pte_nus_dpg&f=w</ref> | ||
*Natural gas prices have come down also below pre-war levels.<ref name=":0" /> | *Natural gas prices have come down also below pre-war levels.<ref name=":0" /> | ||
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===6. Car Prices=== | ===6. Car Prices=== | ||
*Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) increased | *Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) increased 4.3% in February from January. This was the largest increase for the full month of February since 2009’s 4.4% rise. .<ref>https://publish.manheim.com/en/services/consulting/used-vehicle-value-index.html</ref> This recent increase could create upward pressure on inflation short term. | ||
*The Manheim Used Vehicle Value Index (MUVVI) rose to 234.5, down 7.0% from a year ago. | |||
*JPM research expects prices to decline by 2.5% to 5% for new cars and by 10% to 20% for used cars in 2023.<ref>https://www.jpmorgan.com/insights/research/when-will-car-prices-drop#:~:text=Average%20prices%20were%20up%2042.5,to%2020%25%20for%20used%20cars.</ref> | *JPM research expects prices to decline by 2.5% to 5% for new cars and by 10% to 20% for used cars in 2023.<ref>https://www.jpmorgan.com/insights/research/when-will-car-prices-drop#:~:text=Average%20prices%20were%20up%2042.5,to%2020%25%20for%20used%20cars.</ref> | ||