Here’s the inflation breakdown for January 2024 — in one chart

Inflation
declined
in
January
and
consumers’
buying
power
rose
as

price
pressures
for
U.S.
goods
and
services
continued
to
ease.

The

consumer
price
index,
a
key
inflation
gauge,

rose
3.1%
in
January
relative
to
a
year
earlier,
the
U.S.
Labor
Department
said
Tuesday.
That’s
down
from
3.4%
in
December.

The
CPI
measures
how
fast
the
prices
of
everything
from
fruits
and
vegetables
to
haircuts,
concert
tickets
and
household
appliances
are
changing
across
the
U.S.
economy.

While
that
overall
downward
trend
is
encouraging,
there
were
a
few
“disappointments”
under
the
surface,
as
inflation
rose
from
December
to
January
in
categories
such
as
shelter,
food,
electricity
and
airline
fares,
said
Mark
Zandi,
chief
economist
at
Moody’s
Analytics.

Ultimately,
it’s
likely
just
a
“brief
detour”
from
the
broader
disinflation
trend,
which
is
unlikely
to
move
in
a
perfectly
straight
line,
he
added.

“You
get
zigs
and
zags
in
all
these
data,
and
this
was
just
a
zag,”
Zandi
said.
“The
bottom
line:
Inflation
continues
to
moderate.
It’s
still
uncomfortably
high
—
though
…
moving
in
the
right
direction.
And
all
the
trend
lines
still
look
good
aside
from
today’s
data
detour.”

Inflation
has
fallen
significantly
from
its
pandemic-era
peak,
9.1%,
in
June
2022.
Around
that
time,
the
average
consumer’s
paycheck
wasn’t
keeping
up
with
fast-rising
prices.
Their
so-called
“real
earnings”
—
earnings
after
accounting
for
inflation
—
were
negative
for

more
than
two
years.

That
dynamic
has
reversed:
Workers’
hourly
pay
has

exceeded
the
rate
of
inflation
since
May.
In
other
words,
their
wages
can
buy
more.
Real
average
hourly
earnings
rose
by
1.4%
between
January
2023
and
January
2024,
the
Labor
Department

said
Tuesday.

Normalizing
inflation
means
consumers
don’t
need
to
spend
down
their
“excess
savings”
to
support
spending,
according
to
a
recent
outlook
authored
by
J.P.
Morgan’s
Global
Investment
Strategy
Group.

Consumer
sentiment
jumped
13%
in
January
to
its
highest
level
since
July
2021,
which
reflects
“improvements
in
the
outlook
for
both
inflation
and
personal
incomes,”

according
to
the
University
of
Michigan.

Despite
broad
disinflation,
there
are
specific
categories
where
inflation
remains
relatively
high.

“Notable”
categories
include
motor
vehicle
insurance
(where
costs
are
up
20.6%
in
the
past
year),
recreation
(2.8%),
personal
care
(5.3%)
and
medical
care
(1.1%),
according
to
the
Labor
Department.

Prices
for
motor
vehicle
insurance
and
auto
repairs,
for
example,
have

risen
rapidly
following
an
earlier
pandemic-era
surge
in
prices
for
new
and
used
cars,
albeit
with
a
lag.

Additionally,
shelter
inflation
is
up
6%
in
the
last
12
months.
Shelter
is
the
largest
component
of
the
average
household’s
budget,
and
stubbornly
high
inflation
in
the
category
has
propped
up
overall
inflation
readings.

Economists
expect
housing
inflation
to
moderate
due
to
encouraging
signals,
such
as
moderating
national
prices
for
newly
signed
leases,
a
trend
that

tends
to
take
months
to
flow
into
broader
inflation
data.

“Everything
suggests
that’s
going
to
happen,”
Zandi
said.
“The
lag
is
longer
than
I
would
have
anticipated.”

More
from
Personal
Finance:

Why
the
‘last
mile’
of
inflation
fight
may
be
tough

Why
disinflation
is
‘more
ideal’
than
deflation

Workers
may
be
unfairly
sour
on
the
job
market

Other
categories
have
retreated
significantly.

Inflation
for
groceries,
for
example,
has
declined
to
1.2%
over
the
last
12
months,
from
a
peak
of
around
13.5%
in
August
2022.
Some
categories
—
such
as
frozen
noncarbonated
juices
and
drinks,
sugar,
and
beefsteaks
—
remain
elevated,
though.
Their
prices
are
up
by
29%,
7.2%
and
10.7%,
respectively.

Sugar
prices,
for
example,
were
affected
by
“ongoing
shortfalls
and
availability
issues”
in
2023,
said
Amy
Smith,
an
economist
at
Advanced
Economic
Solutions.

Sugar
is
a
key
ingredient
in,
among
other
things,
juices
and
drinks;
the
latter
were
also
affected
by
bad
weather
in
Brazil
and
Florida,
which

reduced
production
of
oranges
and
led
futures
on
frozen
concentrated
orange
juice
to

surge
to
an
all-time
high
in
November,
Smith
said.
And
beef
production
was
down
almost
5%
in
2023,
due
partly
to
the
impact
of
severe
drought
on
pasture
lands,
she
added.

Meanwhile,
overall
energy
costs
have
decreased,
or
deflated,
by
4.6%
in
the
past
year,
with
gasoline
down
6.4%,
natural
gas
17.8%
and
fuel
oil
14.2%.

Inflation
initially
spiked
in
early
2021
as
the
U.S.
economy
reopened
from
its
Covid-19-related
shutdown.

During
the
pandemic,
consumer
demand
for
household
goods
jumped
as
people
spent
more
time
at
home
and
couldn’t
spend
on
travel
and
other
experiences.
Goods
production
couldn’t
keep
up
with
high
demand
amid
snarled
supply
chains.

It
was
a
“double
whammy”
that
caused
prices
to
“skyrocket,”
according
to
Jay
Bryson,
chief
economist
for
Wells
Fargo
Economics.

Now,
supply
chains
and
consumer
demand
for
goods
have
largely
normalized,
Bryson
said.

Inflation
in
the
“services”
side
of
the
economy
—
the
intangible
things
we
consume,
such
as
concerts,
auto
repairs
and
veterinary
visits
—
is
also
declining
but
remains
elevated,
he
said.
A
big
reason
for
this
is
wage
growth,
since
labor
is
a
major
input
cost
for
services
businesses,
economists
said.

Businesses’
demand
for
workers
rose
to
a
record
high
as
the
economy
reopened,
and
wage
growth
jumped
to
its
highest
level
in
decades
as
workers
enjoyed
ample
leverage
in
the
job
market.
That
growth
has
since
eased
as
the

labor
market
has
cooled
from
red-hot
levels,
reducing
the
inflationary
pressure
for
services,
but
remains
elevated,
economists
said.