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What To Watch Within Core CPI After Seasonal Revisions

  • Sequential moves remain in focus, especially after notable upward revisions to two of the three major core components in Friday's new seasonally adjusted figures.
  • Rent of shelter saw little change but both core services ex shelter and in particular core goods ex used cars were revised higher in the last 2-3 months.
  • It left non-shelter core services accelerating to 0.39% M/M in Dec in a move more consistent with Chair Powell at the FOMC Feb 1 presser saying there hasn’t been any sign of disinflation here.
  • Meanwhile, core goods prices ex used cars still ticked higher at 0.27% M/M rather than pausing, better reflecting a stalling in the downtrend in the NY Fed’s supply chain pressure gauge. The upward revision of the latter wasn’t enough to offset still large declines in used car prices from pushing outright core goods deflation through Q4, although it averaged -0.17% M/M per month rather than the initially thought -0.41% M/M.
  • One finding of note here is that whilst new seasonal factors have pushed Q4 inflation higher and might have continued to do the same in January, the new pattern has also pushed core goods inflation softer in the spring. That could be increasingly important if the Fed is starting to move nearer to pausing its hiking cycle at that point.

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