December CPI preview: expecting a big fall in YoY inflation & a below consensus print

As we move through the second week of January, the time has arrived for my latest US CPI preview.

In December, I expect a major drop in the YoY CPI growth rate, and one which is larger than the consensus forecast. Let’s delve in, beginning with a recap of where things currently stand.

Where are we now?

After peaking at 9.1% in June 2022, the YoY CPI growth rate has fallen to 7.1% in November.

Underlying this reduction in inflation has been a MAJOR downshift in MoM CPI growth rates. From January to June 2022, the average MoM change in the CPI was 1.0%. From July to November? Just 0.1%!

The higher MoM growth rates from earlier in 2022 are an INTEGRAL part of the disinflation picture for 1H23, as most months from January to June 2023 will see very high prior comparables rolled off.

The recent decline in MoM growth rates has seen the 3-month annualised CPI growth rate fall to 2.1%, and the 6-month annualised growth rate fall to 3.7%.