ab6 February 2024Global Research and Evidence LabUS Economic PerspectivesJanuary CPI Preview: Seasonal uncertaintyHeadline CPI: UBS US Econ 0.14%, UBS Nowcast 0.08%, consensus 0.15%We project next Tuesday's CPI release to show the headline CPI rose 14bp (seasonally-adjusted) in January as falling gasoline prices once again will likely hold the headline price increase below the core increase. Twelve-month inflation is projected to drop 40bp to 2.9% — a few basis points lower than any other point in the past few years. Our 14bp headline CPI projection is essentially in line with the current Bloomberg consensus average forecast and above the projection from our Nowcasting models. Our projection for the not-seasonally-adjusted level of the January CPI, at 307.926, is within a couple of basis points of recent swaps fixings. Core CPI: UBS US Econ 0.24%, UBS Nowcast 0.19%, consensus 0.30%Our projected 24bp January core CPI increase would see the 12-month change slip to 3.7% following its first appearance below 4% since early 2021 in last month's report. Driven by early year price setting and residual seasonality, we expect a number of components will rise faster in January than in the past couple of months. That broader uptick, however, is obscured by a 3¾% decline in used car prices that is contributing 14 bp less to the core CPI monthly change in January than it was in December. Also this month we expect owners' equivalent rent to slow modestly to around a 40bp increase following increases of 47bp and 50bp in the past two months. Prices for core services excluding rents, which have seen strong increases in the three of the past four months, are projected to rise a little faster in January (55bp) than in December as last month's large 5% decline in leased car pries is not expected to be repeated. A full category roundup of our projection is below in Figure 28Forecasted seasonaly adjusted monthly changes for detailed CPI components and additional details are available in the US inflation forecast spreadsheet on our website. New seasonal factors and used car methodology released on FridayTwo pieces of information released on Friday morning could alter our forecast: First, updated seasonal factors for the CPI will be released. While the updated seasonal factors will likely flatten the downtrend in monthly price changes over 2023, we do not expect the change in the contour will be as notable as what occurred last year when early months of the year were pushed down while October, November, and December were revised up by 11bp on average. Instead, we expect this year's revision to show only moderate changes with core CPI monthly increases in January, July, September, and November revised up about 4bp each while March, April,and May are revised down about 5bp each. There is, however, notable uncertainty surrounding these estim...
