Economy Watch: Is January’s Inflation a Hint of Things to Come?

By D.C. Stribling A single month’s data does not a trend make, but two reports on Wednesday by the Bureau of Labor Statistics evoked the specter of higher inflation, something that hasn’t vexed the U.S. economy much since the early 1980s. Should inflation pick up while wages stay stagnant or worse, the impact on consumer…

By D.C. Stribling

20 dollar bill_1196x673A single month’s data does not a trend make, but two reports on Wednesday by the Bureau of Labor Statistics evoked the specter of higher inflation, something that hasn’t vexed the U.S. economy much since the early 1980s. Should inflation pick up while wages stay stagnant or worse, the impact on consumer spending might be significant.

The BLS first reported that the U.S. Consumer Price Index increased 0.5 percent in January. Moreover, price increases were broad-based, unlike upward blips in recent years based on volatile energy prices. There were price increases in gasoline, shelter, apparel, medical care, and food in January. Over the last 12 months, the all-items index rose 2.1 percent.

The index for all items less food and energy—the so-call core rate of inflation— increased 0.3 percent in January. The price of shelter increased 0.2 percent, as rent and owners’ equivalent rent both rose 0.3 percent. That indicates apartments and houses are still getting more expensive. On the other hand, the price of lodging away from home declined 2 percent for the month.

Separately, the BLS reported that real average hourly earnings for all employees decreased 0.2 percent from December to January. That is, employee wages did not keep up with inflation. Nominally speaking, wages were up 0.3 percent for the month, but that wasn’t enough to keep up with the 0.5 percent increase in the cost of living.

You May Also Like