Another day, another opportunity to see whatever you want to see in the economic data. The latest example arrived yesterday within the packaging of consumer prices, which at once threatens and calms. The source for the duality comes by way of yesterday’s report on January consumer prices, offering a now-familiar refrain of maybe we’re in trouble, and maybe we’re not, a la producer prices.
Top-line inflation advanced by a seasonally adjusted 0.7% last month, according to the Labor Department, up dramatically from December’s slight decline in CPI. The jump was also above the consensus 0.5% forecast for January, and now stands as the highest monthly rate of increase since September’s Katrina-induced 1.2%.
But if the news has got you down, why not keep reading to find something more encouraging to lift your spirits? As with previous bouts of CPI-defined inflation, last month’s ascent is primarily a function of energy prices, a point that comes through loud and clear in the far-less bubbly core CPI, whose pace of ascent was a relatively cool 0.2% in January.
Top-line inflation, in sum, continues to raise warning flags, while the core CPI keeps telling the bond market what it wants to hear. The question is whether anyone will ring a bell when and if energy driven inflation becomes a clear and present danger as opposed to something barely worth mentioning beyond a footnote in future textbooks.