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US DATA: Recreation Services A Particularly Strong Case Of January Price Hikes

US DATA
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  • We touched earlier upon the outsized strength in recreation services, on its own adding 0.06pps to core CPI and helping our collection of “other services” (items within core services beyond housing, lodging, medical services, car insurance and airfares) add 0.15pp to core CPI after just 0.02pp. There has only been one month with a stronger contribution - Jun 2022 - since this calculated series started in 2012.
  • It came as recreation services increased a seasonally adjusted 1.4% M/M, helped by video and audio services jumping 2.0% M/M sa for its highest on record (back to 2010) but also ‘other recreation’ services increasing a rapid 1.5% M/M sa with its weight 2.5x that of video and audio services.
  • As such, the video & audio services contribution to M/M core CPI only increased from 0.07pp to 0.20pp but the sheer magnitude of the acceleration is nevertheless worth noting.
  • In non-seasonally adjusted terms, recreation services increased 1.6% M/M as video and audio services jumped 2.2% M/M. The latter is far stronger than normal with a January average since 2017 of 0.5% (range -0.3% to 0.9%) and with February typically seeing a heavier increase with an average of 1.1% - see chart.
  • Particularly aggressive start-of-year price increases are naturally floated as a reason for this although the sector naturally doesn’t lend itself well to the argument that tariff anticipation is at hand. Some anecdotal evidence likely at least partly at play is the Netflix price hike amounting to 14-16% depending on subscription type after no price hikes in 2024. That said, whilst it was announced Jan 21, it’s not that clear cut as it was due to come into effect at the subscriber’s next billing cycle so the impact will likely be spread over Jan and Feb.
  • Whilst the seasonal adjustment process itself is naturally under scrutiny to see how it handles start-of-year price increases, the translation from 2.2% M/M nsa to 2.0% M/M sa looks small considering the unprecedented nature of the 2.2% increase for a January but the adjustment factors themselves don’t untoward compared to recent years.
  • To be clear though, this is only a small part of the overall acceleration in recreation services and core services more generally but it’s an important example of the frothiness seen in price setting at the start of the year.   
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  • We touched earlier upon the outsized strength in recreation services, on its own adding 0.06pps to core CPI and helping our collection of “other services” (items within core services beyond housing, lodging, medical services, car insurance and airfares) add 0.15pp to core CPI after just 0.02pp. There has only been one month with a stronger contribution - Jun 2022 - since this calculated series started in 2012.
  • It came as recreation services increased a seasonally adjusted 1.4% M/M, helped by video and audio services jumping 2.0% M/M sa for its highest on record (back to 2010) but also ‘other recreation’ services increasing a rapid 1.5% M/M sa with its weight 2.5x that of video and audio services.
  • As such, the video & audio services contribution to M/M core CPI only increased from 0.07pp to 0.20pp but the sheer magnitude of the acceleration is nevertheless worth noting.
  • In non-seasonally adjusted terms, recreation services increased 1.6% M/M as video and audio services jumped 2.2% M/M. The latter is far stronger than normal with a January average since 2017 of 0.5% (range -0.3% to 0.9%) and with February typically seeing a heavier increase with an average of 1.1% - see chart.
  • Particularly aggressive start-of-year price increases are naturally floated as a reason for this although the sector naturally doesn’t lend itself well to the argument that tariff anticipation is at hand. Some anecdotal evidence likely at least partly at play is the Netflix price hike amounting to 14-16% depending on subscription type after no price hikes in 2024. That said, whilst it was announced Jan 21, it’s not that clear cut as it was due to come into effect at the subscriber’s next billing cycle so the impact will likely be spread over Jan and Feb.
  • Whilst the seasonal adjustment process itself is naturally under scrutiny to see how it handles start-of-year price increases, the translation from 2.2% M/M nsa to 2.0% M/M sa looks small considering the unprecedented nature of the 2.2% increase for a January but the adjustment factors themselves don’t untoward compared to recent years.
  • To be clear though, this is only a small part of the overall acceleration in recreation services and core services more generally but it’s an important example of the frothiness seen in price setting at the start of the year.   
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