Feb 16, 2025

The U.S. Consumer Price Index (CPI) experienced a 0.47% increase in January 2025 compared to December 2024, marking the largest one-month change since August 2023. This rise indicates an annualized growth rate of nearly 6%, following a trend where businesses typically implement their annual price increases early in the year. Despite the recent uptick in inflation, data on spending and wage income suggests that nominal growth has remained steady, which could make it challenging for price growth to slow down significantly.

While job turnover has stabilized, workers who remain in their roles continue to see higher pay gains compared to pre-pandemic levels. This ongoing wage growth contributes to inflationary pressures, with an additional 1 percentage point of inflation relative to 2017-2019 expected to persist. The latest data also reveals a divergence in pricing between goods and services, with goods disinflation potentially being more fragile compared to other sectors.

Overall, the January CPI increase does not appear to be unusually high when compared to previous years. After removing volatile components, the price hikes appear consistent with past trends, suggesting that the current inflationary environment may not be as concerning as it may seem at first glance. The stability in nominal growth and wage income dynamics is expected to continue influencing inflation trends in the months ahead.

Stay Well!