Uncertainty Ahead

Macro Markets

CPI

On Tuesday, the Labor Department reported that ­­inflation increased in 2023 as rising shelter, gas and fuel prices took their toll on consumers.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.5 percent in January on a seasonally adjusted basis after increasing 0.1 percent in December, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all-items index rose 6.4 percent before seasonal adjustment.

The index for shelter was the largest contributor, accounting for nearly half of the monthly all-items increase, along with indexes for food, gasoline, and natural gas also contributing. The food index and the energy index increased by 0.5 percent and 2.0 percent respectively over the month.

The all-items less food and energy index rose 5.6 percent over the last 12 months, its smallest 12-month increase since December 2021. The energy index increased 8.7 percent for the 12 months ending January, and the food index increased 10.1 percent over the last year.

Core CPI:

The index for all items less food and energy, which is CORE CPI rose 0.4 percent in January. Categories that increased include shelter, motor vehicle insurance, recreation, apparel, household furnishings and operations indexes. The shelter index increased to 0.7 percent. The rent index and the owners' equivalent rent index rose 0.7 percent since December, while the index for lodging away from home increased by 1.2 percent since January.

Some other January statistics:

• The medical care index fell 0.4 percent, as the physicians' services index declined 0.1 percent

• The index for hospital services increased 0.5 percent over the month, and the index for prescription drugs rose 2.1 percent in January.

• The index for used cars and trucks, which fell 1.9 percent, is continuing a downward trend.

• The index for airline fares fell 2.1 percent over the month.

Retail Sales

The market has been focused on CPI this month after Payrolls, but Retail sales are more likely to give a good idea of what’s going on with the consumer and if they are spending to send higher prices or if financial conditions are better or worse.

The US Census Bureau will release the January Retail Sales report on Wednesday, February 15, at 13:30 GMT. As we get closer to the release time, here are the forecasts of economists and researchers of seven major banks regarding the upcoming data.

Retail Sales in the US are expected to rise by 1.9% vs. -1.1% in December. Meanwhile, sales ex-autos are expected at 0.8% vs. -1.1% in December. The so-called control group used for GDP calculations is expected at 0.8% MoM vs. -0.7% in December.

After the weak figures for November and December, there are signs of a countermovement. According to industry data, car sales have increased considerably. In addition, the renewed rise in gasoline prices is inflating nominal sales at service stations.

Retail sales likely bounced back in January as gas prices climbed and unit auto sales surged, which likely added to an increase in restaurant spending as the weather improved in many areas. Total retail sales likely rose by a robust 1.6%. Sales could have looked less impressive but still healthy elsewhere, with the control group (ex., gasoline, autos, restaurants, and building materials) likely posting a 0.5% increase. That would represent only a partial rebound from December’s decline, as spending on discretionary goods could have been squeezed by higher gasoline prices and spending on services.

In December, retail sales were weak 14 out of 16 times. January was stronger than expected. Add in great January weather with upbeat spending surveys, and the odds of a strong report are high. Bank of America has some good credit card data; their economists are at +3.0% on the headline and +2.6%(!) on the control group.