US CPI Review: December 2023

While slightly hotter than forecast, December's CPI report was largely in-line with my expectations, with an in-depth review of the latest inflation data pointing to further disinflation ahead.

Executive summary

• Headline and core CPI inflation came in slightly above my forecasts for December, and even further above the consensus forecasts, which had expected relatively softer growth versus my forecasts.

• Nevertheless, a clear disinflationary trend remains, with the actual results not materially different to my forecasts (8bp variation for both headline and core CPI growth).

• Important points to note include:

  • Spot market rent adjusted headline and core CPI inflation both remained below 2% YoY, as expected.

  • The slightly stronger relative MoM growth in December follows several consecutive months of relatively modest MoM core CPI growth and below average supercore (i.e. excluding lagging shelter) CPI growth.

  • Durables prices continue to record material MoM declines, as prior weakness in used car prices spreads to new car prices.

  • Wholesale price trends point to further material declines in used car prices over the months ahead.

  • Rent based measures continue to record a gradual deceleration i…