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The Consumer Price Index rose 6.4% between January 2022 and January 2023 as price pressure from household staples such as food and shelter remains elevated, according to a report from the Bureau of Labor Statistics.
The month-to-month increase of 0.5% exceeded analysts’ forecasts, while core inflation, which factors out the more volatile food and energy categories, rose 0.4%, also surpassing expectations. Food prices increased 0.5% and shelter prices increased 0.7% even as energy prices rose 2.0%.
“The pace of disinflation has slowed, and if a 0.5% monthly increase in headline and 0.4% in core prices are what passes for progress, we have low expectations,” Bankrate Chief Financial Analyst Greg McBride said in comments provided to The Daily Wire.
The most recent price level report comes one week after President Joe Biden said that “inflation is coming down” in his second State of the Union address. “Inflation has been a global problem because of the pandemic that disrupted supply chains and Putin’s war that disrupted energy and food supplies,” he said. “But we’re better positioned than any country on Earth.”
The year-over-year inflation reading of 6.4% in January 2023 constituted a slight moderation from the 6.5% recorded in December 2022. Energy prices, which had declined 4.5% in the previous month, were responsible for much of the disinflation, a trend which now appears to be reversing itself since prices for gasoline and utility gas services rose 2.4% and 6.7% respectively in January 2023. The elevated fuel costs occur after gasoline prices attained their highest levels on record last year.
The rise in food prices has been especially salient for households attempting to make ends meet. Costs for food at home increased 11.3% between January 2022 and January 2023, while costs for food away from home rose 8.2% over the same period.
“The broad-based improvement needed to be seen in order to feel good about where inflation is headed is still lacking,” McBride continued. “The leading contributors continue to be categories that are staples of the household budget: food, shelter, electricity, natural gas, apparel, vehicle insurance, and household furnishing and operations.”
Inflation has indeed eroded household purchasing power and led some consumers to fund their budgets with savings and debt. Some 50% of respondents to a Gallup survey said they are “financially worse off” compared to one year ago, while 35% believe they are “financially better off,” marking the most dismal results for the poll since the economy crashed in 2008 and 2009. Lower-income households were the most likely to report that they are financially worse off.
“Inflation has shredded household budgets over the past two years, and not just when it comes to one-off discretionary expenses or special occasions, but for keeping up with day-to-day bills,” McBride added. “Until inflation returns to the 2% neighborhood, pressure on household finances will continue.”
Policymakers at the Federal Reserve have been increasing target federal funds rates in a bid to combat inflationary pressures. Officials raised rates by 0.25% earlier this month after introducing four consecutive rate hikes of 0.75% and one rate hike of 0.5% in the second half of last year. McBride said central bankers are still expected to increase interest rates 0.25% during their meeting next month, although more inflation and unemployment data are expected before officials make their decision.