1Michael Feroli (1-212) 834-5523michael.e.feroli@jpmorgan.comJPMorgan Chase Bank NADaniel Silver (1-212) 622-6039daniel.a.silver@jpmorgan.comMurat Tasci (1-212) 622-0288murat.tasci@jpmchase.comNorth America Economic ResearchGlobal Data Watch12 January 2024J P M O R G A N-0.50.00.51.020172018201920202021202220232024%m/m, saFigure 1: Core CPISource: BLS, J.P. MorganRelative to our expectations, the upside surprise in the head-line measure was driven by a firmer-than-expected 0.4% increase in energy prices, lifted by a strong 1.3% increase in electricity prices. The food CPI was up 0.2%, in line with recent increases. Food away from home, a good measure of broad inflationary pressures, was up a tolerable 0.3%. Within the core measure, prices for core goods were flat last month. Both new (0.3%) and used (0.5%) vehicle prices were up last month (Figure 2), though we expect used vehicle prices should moderate in coming months. 1201301401501601701801902002102200005101520Index, saFigure 2: CPI—used vehiclesSource: BLS, J.P. MorganCore service prices were up 0.4% last month. Increases in the heavily weighted rent measures continue to moderate only very gradually. Tenants� rent was up 0.4% last month, a tick below the November gain, and owners� equivalent rent increased 0.5%, the same as the prior month. Super-core pric-es, core services ex-rents, were up 0.4% in December. Medi-cal care service prices were up a firm 0.7% last month, sup-ported by another gain in the CPI health insurance measure (Figure 3). •Core CPI prices increased 0.3% in December, about in line with the average over the last year •4Q real GDP still tracking around a 2.0% annualized increase•The FOMC may slow balance sheet normalization soon, but we still look for the first cut in June•We expect next week�s December retail sales report to come in on the soft sideThe highly-anticipated December CPI report didn�t deliver any big surprises. While the headline measure increased 0.3%, a tick firmer than expected, the ex-food and energy core category also increased 0.3%, which was in line with expectations. The core measure is now up 3.9% over a year ago, and is running up at a 3.3% annual rate over the past three months. Given this week�s CPI and PPI reports, we expect the December core PCE figure, reported in two weeks, will increase 0.21%, bringing the year-ago increase down to 3.0% from 3.2% in November. Core inflation continues to moderate, but its year-ago run rate is still well above the Fed�s 2% goal for PCE inflation. In this instance we don�t see the case for the Fed to rush into rate cuts. Certainly as it heads into the late January meeting there is little suggesting the economy is weakening in a way that it should be biased to ease soon. If it doesn�t signal that bias in January then, barring some major shock, it�s very unlikely to cut in March. We ar...
