Inflation permeated the food and energy sectors once again in January, as the Consumer Price Index (CPI) report released this morning reflected a 7.5% annual gain in prices in January, the fastest rise since 1982. The figure came in higher than the Dow Jones’ estimate, which predicted an annual increase of 7.2%
Even though prices rose overall, a closer look at the report price shows that increases were not equally distributed throughout all sectors.
“While much of January's jump in the CPI was from food and electricity prices, increases were broad-based across the consumer price basket,” Bill Adams, chief economist for Comerica Bank, told Yahoo Finance. “Stickier prices like shelter and health-care services grew faster than the Fed's target in the month.”
Energy prices experienced the largest percentage gain out of all sectors, with total energy prices rising 27% year-over-year in January 2022. Oil prices ran up 9.5% during the month as part of a 46.5% year-over-year increase.
While in total, prices across all sectors rose 0.6% in January, seasonally adjusted, food and used vehicle price increases drove much of the non-energy inflation.
Food prices rose by .9% in Jan. 2022 (representing a 7% increase over the last 12-month period), while used vehicles rose 1.5% last month (and 40.5% year-over-year). Medical care commodities experienced a similarly high level of inflation, increasing .9% on the month and 1.4% on the year. Clothing and apparel rose 1.1% during the month and is up 5.3% on an annual basis. Interestingly, new vehicle prices remained flat after 1.2% in December.
Additionally, shelter prices rose .3% last month, representing the second consecutive month of decelerating inflation in the sector. Gasoline prices actually declined nationally by .8%, while utility (piped) gas services fell by .5%.
Despite some cooling in gas prices and utility services, inflation continues to exceed Fed targets. With oil prices rising precipitously in response to concerns regarding Russia’s actions towards Ukraine, it is likely premature to consider this a real win for consumers struggling with gas prices approaching historical highs.
The Fed previously signaled that they will take a more aggressive approach to combating inflation in 2022. Some analysts, like Bank of America’s (BAC) head of global economics Ethan Harris, believe it possible that we see as many as seven rate hikes this year.
In a press release a few hours after the Bureau of Labor Statistics published the CPI numbers, President Joe Biden acknowledged the naggingly elevated price inflation report, while emphasizing positive wage growth and projections that inflation would “ease substantially” by the end of 2022.
“While inflation continued to overshoot the Fed's target in January, fundamental drivers of inflation are starting to improve,” Adams noted. “Remember, a big part of the surge in prices was from shortages, and the economy is making big strides to reduce shortages. Businesses made a huge inventory build in the fourth quarter of last year, and surveys (ISM, NFIB) show that businesses continued to grow inventories, worked through order backlogs, and [saw] less supplier delivery delays in January. Over time this will show inflation, but it wasn't enough to help in January.”
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.