US Core CPI Rises Less Than Expected in December

Summary

Michael McKee reviews the December US CPI report, noting headline CPI rose 0.3% m/m and 2.7% y/y while core CPI rose 0.2% m/m and 2.6% y/y. The core reading was a downside surprise and matched a four-year low. McKee attributes much of the softness to gasoline, while housing, hotels and apparel showed firm or distorted readings. He cautions that the government shutdown created data distortions, making the report harder to interpret.

• December headline CPI rose 0.3% m/m and 2.7% y/y.
• Core CPI rose 0.2% m/m and 2.6% y/y, below expectations and at a four-year low.
• Gasoline prices fell 0.5% m/m and drove much of the softer headline print.
• Housing costs were firm, with owners' equivalent rent up 0.3% and rent up 0.4%.
• Hotels surged 3.5% and apparel rose 0.6%, partly reflecting shutdown and Black Friday distortions.
• Goods prices were flat while services prices rose 0.3%.
• McKee called the report fairly contained but warned that shutdown-related distortions limit confidence in the details.