Inflation Slows, Sentiment Improves: January 9 – 13

Energy prices fell sharply (again) in December. Here are the five things we learned from U.S. economic data released during the week ending January 13.


Inflation decelerated in December. The Consumer Price Index (CPI) declined a seasonally adjusted 0.1 percent after increasing 0.1 percent in November and 0.4 percent in September and October. The Bureau of Labor Statistics (BLS) has consumer prices up 6.5 percent over the past year (the smallest year-to-year gain since October 2021). Energy CPI fell 4.5 percent as gasoline prices plummeted 9.4 percent. Gasoline prices were down 1.5 percent from a year earlier. Food CPI gained 0.3 percent, with prices for meats/poultry/eggs gaining 1.0 percent (eggs: +11.1 percent). Food prices have risen 10.4 percent over the past year. Net of energy and food, core CPI increased 0.3 percent (up from +0.2 percent in November). Up were prices for shelter (+0.8 percent), apparel (+0.5 percent), transportation services (+0.2 percent), and medical care services & commodities (+0.1 percent). New (-0.1 percent) and used (-2.5 percent) vehicle prices both declined. Core CPI was up a still robust 5.7 percent over the past year. 

Consumers’ sentiment improved in early January as inflationary concerns waned. The University of Michigan’sIndex of Consumer Sentiment jumped by 4.9 points to a seasonally adjusted 64.6 (1966Q1=100). Should the preliminary January reading hold when finalized in two weeks, it would keep the measure only 3.9 percent below year-ago levels. The current conditions index surged 9.2 points to 68.2 (January 2022: 72.0), while the expectations index added 2.1 points to 62.0 (January 2022: 62.0). The press release noted that one-year inflation expectations dropped to an eight-month low of +4.0 percent (still twice the Federal Reserve’s two-percent inflation target). 

Small business owners’ moods deteriorated as 2022 ended. The Small Business Optimism Index lost 2.1 points in December to a seasonally adjusted 89.8 (1986=100). The National Federation of Independent Business’s index had not been this low since last June. Eight of ten index components declined, including sharp declines in economic expectations and earning trends. Only one index component—current inventories—improved in December. The press release said that “small business owners are not optimistic about 2023,” resulting from “several economic uncertainties” and inflation. 

Wholesalers built out inventories in November. Merchant wholesaler inventories grew 1.0 percent to a seasonally adjusted $933.1 billion. The Census Bureau reports that inventories have swelled 20.9 percent over the past year. Durable goods inventories increased 1.1 percent (with gains greater than one percent for furniture, lumber, professional equipment, hardware, and machinery). Nondurable goods inventories expanded 0.4 percent, including a 4.0 percent boost for farm products. Wholesale sales fell 0.6 percent to $693.7 billion, as durable goods sales slumped 1.7 percent. The latter was due to sharp declines in automobiles, lumber, professional equipment, metals, and electrical equipment. Wholesale sales remained 8.7 percent above year-ago levels. 

Consumers took on more credit in November. The Federal Reserve estimates consumers held a seasonally adjusted $4.757 trillion in non-real estate backed debt, up $28.0 billion for the month and 7.9 percent from a year earlier. Outstanding revolving credit balances—i.e., credit cards—swelled by $16.5 billion to $1.188 trillion (+14.9 percent versus November 2021). Nonrevolving balances (e.g., college and automobile loans) grew by $11.5 billion to $3.570 trillion (+5.8 percent versus November 2021). 

Other U.S. economic data released over the past week:

  • Jobless Claims (Week ending January 7, 2023, First-Time Claims, seasonally adjusted): 205,000, -1,000 vs. the previous week, -33,000 vs. the same week a year earlier). 4-week moving average: 212,500 (-4.8% vs. the same week a year earlier). 
  • Import Prices (December 2022, All Imports, not seasonally adjusted): +0.4% vs. November 2022; +3.5% vs. December 2021. Nonfuel Imports: +0.4% vs. November 2022; +1.9% vs. December 2021.
  • Export Prices (December 2022, All Exports, not seasonally adjusted): -2.6% vs. November 2022; +5.0% vs. December 2021. Nonagricultural Exports: -2.7% vs. November 2022; +4.4% vs. December 2021. 

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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