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US inflation higher than expected in January at 3.1% | Business

US inflation higher than expected in January at 3.1% |  Business

 


Inflation was higher than expected in the United States last month as it continued to fall from its highest levels in a generation.

Price growth fell to an annual rate of 3.1% in January, according to official data; above economists' expectations of 2.9%. In December, the consumer price index stood at 3.4%.

The latest official data sparked a selloff on Wall Street, with the S&P 500 falling 1.3% and the Dow Jones industrial average falling 1.1%.

Stock markets have reached record highs in recent weeks as investors have become more confident about easing inflation and some of America's largest companies have reported strong results.

Even though inflation has fallen sharply since peaking above 9% in June 2022, many Americans are still feeling the effects. Joe Biden, who is running again in November, must convince them that the economy is working for them.

On a monthly basis, the consumer price index increased by 0.3% in January, compared to 0.2% in the previous month and also higher than the 0.2% expected.

The so-called core index, which excludes volatile food and energy prices, is closely watched because it tends to provide a better indication of the path of inflation. It also increased over the month, from 0.3% to 0.4%.

The U.S. Bureau of Labor Statistics, which releases the data monthly, said the index was pushed higher in January by rising housing costs, including rent; car insurance; and medical care.

The U.S. economy has remained robust in recent years, creating millions of jobs and defying recession forecasts, even as the Federal Reserve embarked on an aggressive campaign to combat inflation. Employers created 353,000 jobs last month alone.

Many Americans do not feel positive about the economy as they grapple with their own financial realities. A closely watched University of Michigan survey, however, indicated a surge in consumer confidence last month, with confidence reaching its highest level since July 2021.

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Now that annual inflation is moving back towards 2%, Fed policymakers are preparing to cut interest rates for the first time in four years. Wall Street had been betting that the central bank would begin doing so as early as May, after Fed Chairman Jerome Powell signaled that a cut was unlikely next month.

Paul Ashworth, chief North America economist at Capital Economics, said January's surprisingly strong results will reinforce the view in some quarters that the last mile is the hardest as inflation comes back down to earth.

Prices in key categories like clothing and medical care products, however, fell last month. There is still a lot of disinflation in the economy, Ashworth noted.

Sources

1/ https://Google.com/

2/ https://www.theguardian.com/business/2024/feb/13/us-inflation-rate-january

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